==============================================================================

                SECURITIES AND EXCHANGE COMMISSION
                      WASHINGTON, D.C. 20549
                      _______________________


                          FORM 10-KSB/A

             ANNUAL REPORT UNDER SECTION 13 OR 15(d)
              OF THE SECURITIES EXCHANGE ACT OF 1934

           For the fiscal year ended: December 31, 2004

                Commission File Number: 000-22057
                      _______________________

                   M Power Entertainment, Inc.
         -----------------------------------------------
         (Formerly known as GK INTELLIGENT SYSTEMS, INC.)
          Name of Small Business Issuer in Its charter)

               Delaware                              76-0513297
      -----------------------------                -----------------
     (State or Other Jurisdiction of               (I.R.S. Employer
     Incorporation or Organization)                Identification No.)

      432 Park Avenue South, 2nd Floor, New York, NY  10016
      ------------------------------------------------------
       (Address of Principal Executive Offices) (Zip Code)

                          (646)437-3614
         ------------------------------------------------
         (Issuer's Telephone Number, including Area Code)


 Securities registered under Section 12(b) of the Exchange Act:

                               None

  Securities registered under Section 12(g) of the Exchange Act:

                  Common Stock, $0.001 Par Value

     Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that a
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.   Yes [x]    No  [ ]

     Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.    [ ]

     Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act.)      Yes [ ]    No  [X]

     The Issuer's revenues for the most recent fiscal year ended December
31,2004 were $93,381. The aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant on April 6, 2005 based
upon the average bid and ask price of the common stock on the OTC Bulletin
Board for such date, was $643,123. The number of shares of the Registrant's
common stock issued and outstanding on May 5, 2005, was 267,967,900.

     Transitional Small Business Disclosure Format. Yes [ ]  No [x]
==============================================================================

<PAGE> 1

                        TABLE OF CONTENTS

ITEMS                                                                    PAGE
-----                                                                    ----
                             PART I

Item 1.    Description of Business........................................  4
Item 2.    Description of Property ....................................... 20
Item 3.    Legal Proceedings.............................................. 20
Item 4.    Submission of Matters to a Vote of Security Holders............ 21

                             PART II

Item 5.    Market for Common Equity and Related Stockholder Matters ...... 21
Item 6.    Management's Discussion and Analysis or Plan of Operation...... 22
Item 7.    Financial Statements .......................................... 24
Item 8.    Changes In and Disagreements With Accountants on
           Accounting and Financial Disclosure............................ 56
Item 8A.   Controls and Procedures........................................ 56
Item 8B.   Other Information.............................................. 56

                             PART III

Item 9.    Directors, Executive Officers, Promoters and Control Persons;
           Compliance With Section 16(a) of the Exchange Act.............. 56
Item 10.   Executive Compensation ........................................ 57
Item 11.   Security Ownership of Certain Beneficial Owners and
           Management and Related Stockholder Matters..................... 62
Item 12.   Certain Relationships and Related Transactions................. 64
Item 13.   Exhibits....................................................... 64
Item 14.   Principal Accountant Fees and Services......................... 72



<PAGE> 2



                       CAUTIONARY STATEMENT

     Some of the statements contained in this Form 10-KSB for GK Intelligent
Systems, Inc. and subsidiaries ("Company") discuss future expectations,
contain projections of results of operation or financial condition or state
other "forward-looking" information.  These statements are subject to known
and unknown risks, uncertainties, and other factors that could cause the
actual results to differ materially from those contemplated by the statements.
The forward-looking information is based on various factors and is derived
using numerous assumptions.  Important factors that may cause actual results
to differ from projections include, for example:

     .   the success or failure of management's efforts to implement their
         business strategy;
     .   the ability of the Company to raise sufficient capital to meet
         operating requirements;
     .   the uncertainty of consumer demand for our product;
     .   the ability of the Company to protect its intellectual property
         rights;
     .   the ability of the Company to compete with major established
         companies;
     .   the effect of changing economic conditions;
     .   the ability of the Company to attract and retain quality employees;
         and
     .   other risks which may be described in future filings with the SEC.

     Words such as "anticipates," "expects," "intends," "plans," "believes,"
"seeks," "estimates," and variations of such words and similar expressions are
intended to identify such forward-looking statements.  These statements are
not guarantees of future performance and are subject to certain risks,
uncertainties and assumptions that are difficult to predict.  Therefore,
actual results and outcomes may differ materially from what is expressed or
forecasted in any such forward-looking statements.  Such risks and
uncertainties include those set forth herein under "Risk Factors" as well as
those noted in the documents incorporated herein by reference.  Unless
required by law, the Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.

Recent Events

    We have filed with the State of Delaware an amendment to our Certificate
of Incorporation changing our corporate name from GK Intelligent Systems, Inc.
to M Power Entertainment Inc., effective May 18, 2005.  This amendment was
ratified on May 10, 2005 by the unanimous written consent of our Board of
Directors and by stockholders holding a majority of our outstanding shares of
common stock, also by written consent on February 21, 2005.

     Also on May 10, 2005, our Board of Directors ratified by unanimous
written consent a proposal to effect a reverse stock split of our authorized
and issued common stock on a one share for two hundred shares basis (1:200).
The reverse stock split was also approved by the written consent of
stockholders holding a majority of our outstanding shares of common stock on
February 21, 2005.  In lieu of issuing fractional shares, we paid $0.25
for any fraction of a shares resulting from the split.  The split became
effective at the opening of business on May 18, 2005.  Following the reverse
stock split, our total outstanding shares of common stock was reduced to
1,374,759 shares.  Also effective on May 18, 2005, our trading symbol on the
Over the Counter Bulletin Board was changed from "GKIG" to "MPWE."

      HJ & Associates, LLC, Certified Public Accountants, resigned as our
independent certifying accountants, effective May 23, 2005.  The termination
of our relationship with HJ was unanimously accepted by our board on directors
on May 23, 2005.

     Also on May 23, 2005, our board of directors unanimously approved a
resolution to engage Hansen Barnett & Maxwell, LLC, Certified Public
Accountants, to become our new independent certifying accountants.


<PAGE> 3

                              PART I

Item 1.    Description of Business.

      We are a newly reorganized public company comprised of acquired
successful private companies engaged in the production, distribution and
marketing of entertainment products and services.  The private companies we
have acquired provide technical staffing services and business software
consulting as well as software development and sales.  Our more recent
acquisitions offer music production and sales and film distribution services.
These reflect our evolving emphasis toward the production and distribution of
entertainment products and services.

      We emphasize the following elements which we call the "M Power" business
model:

   1) Empowerment on both the individual and group levels, known internally as
      the RAWW lifestyle
   2) Application of state-of-the art micro-marketing technologies and
      concepts
   3) Leveraging of new Internet distribution venues
   4) The introduction of decentralized management concepts to the
      entertainment industry
   5) Creation of a work environment to foster high achievement and
      entrepreneurship

Our current activities employ the following three steps:

   1) Acquire successful companies within the entertainment and technology
      industries;
   2) Integrate the acquired entities in to the "M Power" business model by
      empowering their management teams for growth and providing instructions
      on how to empower others;
   3) Unify their efforts under the GKIS umbrella into a single cohesive
      thrust by showing them how to share their assets, co-opt their services
      and cross-market their products and services.

History
-------

      We incorporated in Delaware on February 26, 1988 under the name
"Technicraft Financial, Ltd."  In October 1991, we changed our name to LBM-US,
Inc.  Pursuant to an agreement effective August 1994, we acquired GK
Intelligent Systems, Inc., a Texas corporation, and GK Intelligent Systems
became a wholly owned subsidiary of our Company.  In August 1994, we also
changed our name to GK Intelligent Systems, Inc.   In September 1997, we
merged with our wholly owned subsidiary, GK Intelligent Systems.

      Early in 1998, we began marketing our learning technology, called Smart
OneSM, and, in early 1999, we developed our first product, Around the Web in
80 Minutes, that targeted consumers desiring to learn how to use the Internet.
Approximately thirty thousand copies of the product were sold retail.
However, we encountered difficulty in securing the capital necessary to
sustain our growth and brand our product.  We closed our doors in June 1999
with approximately $4 million in outstanding debt.  We then became dormant and
had no operations until 2003.


<PAGE> 4


     In 2003, we formed three wholly-owned subsidiary companies, Smart One
Learning Systems, Inc., Recording Artists Worldwide, Inc. and The Baseball
Club, Inc.  Two of those subsidiaries, Smart One Learning Systems, Inc., and
The Baseball Club, Inc. are currently dormant.  We formed Recording Artists
Worldwide, Inc. to be a music entertainment services company which intends to
offer state-of-the-art personalization and interactivity via the Web and cable
television to music enthusiasts.

     In July 2004, we acquired Stellar Software Network, Inc. ("Stellar"), as
a wholly owned subsidiary. According to the terms of the Purchase Agreement,
we acquired all of the issued and outstanding shares of common stock of
Stellar, in exchange for $191,000, paid in the form of the 8,025,211 shares of
our common stock.  Stellar is a Texas corporation that hires software
programmers and other technical professionals and contracts them as a staffing
agency to outside companies. The acquisition of Stellar allowed us to generate
our first revenues since 1999.  However, due in part to the fact that
Stellar's professional staffing business did not integrate well with the
Company's technology and entertainment vision for the future, the acquisition
of Stellar was rescinded during the third quarter of 2005.

     In August 2004, we acquired Ascendant Texas Source Group, Inc. ("TSG") as
a wholly-owned subsidiary.  According to the terms of the Purchase Agreement,
we acquired all of TSG's issued and outstanding common stock in exchange for
$1,500,000, in the form 42,857,153 shares of our common stock.  TSG is a Texas
corporation, which acts as a full service provider of quality collaborative
e-business process software, process consulting, rapid web development and
hosting services.  In January of 2005, however, Ascendant lost its only
significant customer and ceased operations. The Company is in litigation with
the former owner of Ascendant, asserting misrepresentation of its status at
the time of the sale and seeking to recover the shares issued in the
transaction. The seller has made various counter claims. The results of the
litigation are undeterminable at this time.

     On January 17, 2005, the Company entered into a Purchase Agreement with
two unrelated individuals, whereby the Company acquired all of the issued
and outstanding common stock of Corazong Music Management B.V., a Dutch
corporation ("Corazong"), in exchange for $1,260,000, in the form of
100 shares of Series B Convertible Preferred Stock.  The Company also agreed
to provide Corazong with a $1,500,000 line of credit to be used to develop
and market its catalog and to develop new talent and artists. Although the
Agreement was on February 11, 2005 and the common stock has been issued, the
transaction is not considered consummated to date, as the Company has not yet
been able to provide the $1,500,000 line of credit as provided in the
Agreement.  As an additional stipulation of the Agreement with Corazong, the
sellers have retained the right to repurchase 49% of Corazong for a period of
up to two years.

     Corazong, formerly a privately-held European company, is a music
recording and production entity that released its first music CD in 1999 and
is currently attempting to expand its operations into Western Europe and the
United States.  The most significant asset currently managed by Corazong is
its catalog of music recordings.

     On March 2, 2005, the Company agreed to purchase all of the outstanding
common stock of R.S. Entertainment, Inc., a Utah Corporation, ("RSE") for
$1,020,000 in shares of the Company's unregistered common stock, or in the
equivalent value of Series B preferred shares.   The Company also agreed to


<PAGE> 5


provide RSE with a $2,500,000 line of credit to be used for print and
advertising funds for the films it distributes. By providing the print and
advertising money for the films it distributes, RSE expects to retain a
substantial percentage of the box office and residual revenues from the films.
The Line of Credit is expected to be available to RSE upon the Company's
successful completion of its proposed financing.

      The Sellers have the right to rescind the Agreement, due to the fact
that the line of credit was not available after 120 days of the closing date.
Should this Agreement be rescinded, the Sellers will return the Company's
shares received as part of the purchase price for the RSE stock.  Sellers
shall retain any shares issued in connection with their employment with RSE
(subsequent to March 2, 2005) as liquidated damages. Although the Agreement
has been signed and the common shares have been issued, the Acquisition is not
yet considered to have been consummated, as the contracted line of credit has
not yet been provided.

     Specializing in the independent motion picture industry, RSE provide
theatrical film distribution services and strategic market development.  RSE
works with third parties in creative advertising, media placement and public
relations to achieve maximum box office return for their clients.  RSE also
offers complete distribution services for clients   whether the release is
limited, regional or nationwide.

     The founders of R.S. are Ron Rodgers and Randy Slaughter.  Each has over
35 years of theatrical distribution and marketing experience.  Both Mr.
Rodgers and Mr. Slaughter will retain their executive positions with RSE
subsequent to its acquisition by the Company.

     On April 7, 2005, we entered into a Purchase Agreement with two unrelated
individuals, in order to acquire 100% of the issued and outstanding common
stock of White Canyon, Inc. ("White Canyon") and Channel Access, Inc.
("Channel Access").  According to the terms of the Agreement, we issued to the
individuals an aggregate of 1,000,000 shares of restricted Series C
convertible preferred stock, each share of which may be converted into four
shares of post-split restricted common stock, or redeemed by the Company at
$4.00 per share.  Additionally, upon our completion of a stock-split, the
Company will issue to the individuals an additional 100,000 post-split shares
of its common stock as further consideration for the acquisitions.  Both White
Canyon and Channel Access are entities specializing in the sale and
distribution of proprietary computer software programs.  Both entities
reported significant revenues during the year ended December 31, 2004 as well
as an overall net income from operations. Upon our completion of a listing on
the American Stock Exchange or on September 30, 2005, whichever is earlier, we
will redeem any unconverted shares of preferred stock at $4.00 per share. The
Company anticipates that, following the Closing Date, White Canyon and Channel
Access will operate as subsidiaries ("Subsidiaries") of the Company. Also, the
Sellers have the right to rescind this Agreement if any unconverted preferred
shares are not redeemed by September 30, 2005.   Should this Agreement be
rescinded, the Sellers will return our shares received as part of the purchase
price for the White Canyon and Channel Access stock.  The Sellers shall retain
the 100,000 post-split common shares issued in connection with the Agreement
as full liquidated damages.

     White Canyon, Inc. is a provider of security software aimed at protecting
individuals and businesses from personal identity theft and trade secret
theft. White Canyon's markets and sells a hard drive sanitizing software
product called WipeDrive, and an individual file scanning and deletion utility
program called SecureClean.


<PAGE> 6


     Channel Access specializes in marketing and distributing utility and
personal productivity software products to retail stores in the United Sates
and Canada.  Channel Access also distributes utility software for GetData, an
Australian software manufacturer.

     Despite the fact that the Agreement has been signed and the shares have
been issued, this Agreement was not considered to have been fully consummated,
due to the fact that the preferred shares were never converted.  In September
2005, both White Canyon and Channel Access elected to rescind the Agreement,
and the shares issued were returned to the Company.

     On May 25, 2005, we entered into a Purchase Agreement whereby we acquired
70% of the issued and outstanding common stock of M Power Futures, Inc., a
Delaware corporation ("MPF"), in exchange for 15,250 of our post-split common
shares.

     MFP is an entity with no operations, assets, or liabilities, other than
its deposit toward the 100% ownership of Alan Howarth, Inc., a Nevada
Corporation.  MPF is to acquire 100% of the issued and outstanding common
stock of Alan Howarth, Inc. ("Howarth") pursuant to a Purchase Agreement dated
May 18, 2005.  Per the terms of the Purchase Agreement, MPF issued 5,000,000
shares of its common stock in exchange for all the issued and outstanding
common shares of Howarth.  In addition, MPF agreed to provide, on a "best
efforts" basis, $2,000,000 in growth capital, to be paid in semi-annual
installments of $500,000, to Howarth.  Per the Agreement Howarth retains the
right to rescind the Agreement if we are unable to have its common stock
listed on the American Stock Exchange within 180 days of the Agreement date,
or if the Company fails to issue the required number of cash and shares to
Howarth within thirty days of becoming listed on the American Stock Exchange.
Due to the fact that we have not been able to provide the growth capital, and
are not yet listed on the American Stock Exchange, this Agreement is not yet
considered to be fully consummated.

     Howarth is a Nevada corporation engaged in the business of musical
production and distribution. Howarth's primary assets are a substantial music
library, various patents and rights pertaining to the library, and music and
recording equipment.

Business Overview
-----------------

     In 2004, we developed a merger and acquisition strategy with a focus on
business opportunities in the music and entertainment markets.  A primary
aspect of our strategy is for us to act as a holding company that acquires
profitable private entities interested in growing, who believe the public
venue is a viable strategy for securing growth capital and professional
support.

     We currently operate through our wholly-owned subsidiaries in the
technology staffing and software support industries.  Additionally, in 2005,
we consummated acquisitions that will allow us to branch-out into and derive
revenues from the entertainment media and technology industries.


<PAGE> 7


     We intend to become a key player in the entertainment and technology
markets, primarily through our subsidiary Recording Artists Worldwide, Inc.,
or RAWW!, and the acquisition of various successful entertainment and
technology entities. We are placing a priority on finding companies that have
business models synergistic with our Recording Artists Worldwide initiative.

Operations - Recording Artists Worldwide, Inc.
----------------------------------------------

     RAWW is a startup venture for which technology development has not yet
begun. When fully implemented, we intend for RAWW to be a music entertainment
services company offering state-of-the art personalization and interactivity
via the Web and cable television to music enthusiasts. We believe RAWW will
advance our personalization technologies, cable TV and the Internet to create
a one-to-one relationship between music fans of all types, music industry
service providers (recording artists, record companies, etc.) and suppliers of
music industry goods and services (brand merchandisers).

     We intend for RAWW to be unique in its emphasis on establishing enhanced
personalization as a key element of market transactions, as well as its
ability to execute that vision by integrating advanced technological
capabilities with highly creative "artistic" tools and expertise.  By
leveraging its personalization technology, R we believe RAWW can open the door
to a new level of relationship between music consumers and suppliers.

     RAWW's proposed personalization technology is expected to be able to
bring music stars to life in an innovative way.  Each music fan would
experience a one-on-one, "up close and personal" relationship with their music
star of choice by having both virtual (i.e., with the star's human-appearing
software avatar) and real two-way dialogue.   RAWW's proposed technology is
unique; it plans to offer music fans a friendly, personal environment.  The
technology can open the door to intimate dialogue through voice interaction
technology, and find ways to tap into human feelings and emotions with the
goal of drawing each fan completely into new experiences that will be
remembered.

Operations - Stellar Software Network, Inc.
-------------------------------------------

    Stellar Software Network, Inc. is a provider of professional software
services, offering custom software development, systems integration,
onsite/offsite and offshore development.  Stellar also provides both temporary
and permanent IT staffing personnel.  The Company's Agreement with Stellar was
rescinded in the third quarter of 2005.

Operations - Ascendant TSG
---------------------------

     Founded in 1992, Ascendant TSG is a Houston-based full service provider
of quality collaborative e-business process software, process consulting, web
development and hosting services.  Ascendant TSG ceased operations in the
second quarter of 2005.

Products and Services
---------------------

      Stellar Software Network, Inc. - provides IT staffing and software
      development

      Ascendant TSG  - provides business process consulting and information
      hosting services.


<PAGE> 8


     The Company entered into Acquisition Agreements with following entities
during the 2005 fiscal year, although none of which have been fully
consummated through the date of this amended filing:

     CoraZong Records - provides music recording and distribution

     R.S. Entertainment - provides independent film distribution and strategic
     film market development

     WhiteCanyon, Inc. - provides software products WipeClean, WipeDrive Pro,

     SecureDrive, MediaWiper, IntelliMover, Recover My Files, and
     MyPasswordVault, Channel Access, Inc. - offers marketing and distribution
     of software products

     We are in the process of seeking out additional acquisition candidates
such that we can offer other services such as entertainment production
financing, fashion merchandising and promotion, establishment of health and
fitness venues, entertainment and education distribution venues and
facilitation of live interactive events.

Marketing and Distribution
--------------------------

     Stellar and Ascendant TSG market their respective services to corporate
customers. The potential customers are contacted by their marketing people who
make proposals for services to be provided to the customers. In many cases the
customers come to them and request the services based upon their past
experience with the companies.  During the 2004 fiscal year, our marketing
efforts were minimal.

Material Contracts
-------------------

     On July 15, 2004, we entered into a Consulting Agreement with Sunil
Nariani, the president of Stellar, whereby Mr. Nariani will perform various
consulting and administrative services for our Stellar subsidiary, in exchange
for a fee of 3,529,412 shares of common stock, payable in installments of
294,117 shares per month.  The term of this Agreement is one year, which will
automatically renew unless prior written notice is given.  The Consulting
Agreement with Mr. Nariani was rescinded in the third quarter of 2005.

Recent Developments
-------------------

     On January 17, 2005, we entered into a Purchase Agreement with two
unrelated individuals, whereby we acquired all of the issued and outstanding
common stock of Corazong Music Management B.V., a Dutch corporation, in
exchange for $1,260,000, payable in Series B Convertible Preferred Stock.  As
an additional stipulation of the Agreement with Corazong, the sellers have
retained the right to repurchase 49% of Corazong for a period of up to two
years.  The agreement was signed on February 11, 2005.

     As an additional stipulation of the Purchase Agreement, we agreed to
provide Corazong with a $1,500,000 line of credit starting on March 15th, 2005
to be used to develop and market its catalog and to develop new talent and
artists.  We have not been able to provide the line of credit through the date
of this filing.  Therefore, the Acquisition is not deemed to have been fully
consummated at this time.


<PAGE> 9


     Corazong, formerly a privately held European company, released its first
CD in 1999 and is now actively positioning its artists in the U.K, Belgium,
Spain, Scandinavia and the German-speaking countries.  Headquartered in the
Netherlands, the company is branching out to Canada, Mexico and the U.S. where
it will be launching its album catalog (currently at 75+ deep) in 2005.
CoraZong's music catalog appraised at 1,500,000 euros or $1,991,101 US.

     On March 2, 2005, we contracted to purchase all of the outstanding common
stock of R.S. Entertainment, Inc., a Utah Corporation, for $1,000,000 in
shares of our Series B Convertible Preferred Stock.   We also agreed to
provide R.S. Entertainment with a $2,500,000 line of credit to be used for
print and advertising movie for the films it distributes. By providing the
print and advertising money for the films it distributes R.S. expects to
retain a larger percentage of the box office and residual revenues from the
films.

      As a condition of the purchase GKIS will provide an operating finance
line of credit to RS-Sub to be used to develop and market its catalog and to
develop new talent and artists. The line of credit will be $2,500,000 and is
expected to be available upon GKIS's successful completion of its proposed
financing. Due to the fact that the line of credit was not available as of May
31, 2005, the acquisition has not been fully consummated, and the Sellers have
the right to rescind at any time, in which case the Sellers will return the
GKIS shares received as part of the purchase price for the RS stock.  Sellers
shall retain any shares issued in connection with their employment with RS-Sub
as liquidated damages.  Neither party will have any additional rights,
remedies, or obligations as to the other in case of recession of this
Agreement.

     Specializing in the independent motion picture industry, R.S. provides
theatrical film distribution services including strategic market development.
RSE works with talented partners in creative advertising, media placement and
public relations to achieve maximum box office return for their clients.  The
company also offers a complete distribution job for clients   whether the
release is limited, regional or nationwide.

     The founders of R.S. Entertainment are Ron Rodgers and William R. (Randy)
Slaughter.  Each has over 35 yeas of theatrical distribution and marketing
experience and has served in executive positions with some of the largest and
most profitable independent production and distribution companies in America.

     On April 7, 2005, we entered into a Purchase Agreement with two unrelated
individuals, whereby we contracted to acquire 100% of the issued and
outstanding common stock of White Canyon, Inc. "White Canyon" and Channel
Access, Inc. "Channel Access".  According to the terms of the Agreement, we
issued to the individuals an aggregate of 1,000,000 shares of restricted
Series C convertible preferred stock, each share of which may be converted
into 800 shares of restricted common stock, or redeemed by us at $4.00 per
share.  Additionally, upon our completion of a stock-split, we will issue to
the individuals an additional 20,000,000 (pre-split) shares of our common
stock as further consideration for the acquisitions.  Both White Canyon and
Channel Access are entities specializing in the sale and distribution of
proprietary computer software programs.

     Upon completion of a listing on the American Stock Exchange of GKIS but
no later than September 30, 2005, we agreed to redeem any unconverted shares
of preferred stock at $4.00 per share.  In the third quarter of 2005, the
Sellers elected to rescind the Agreement as the preferred shares were not
redeemed by September 30, 2005.   The Sellers returned the GKIS shares
received as part of the purchase price for the White Canyon and Channel Access
stock.  Sellers retained the 20,000,000 (pre split) common shares issued in
connection with the Agreement as full liquidated damages.


<PAGE> 10


     White Canyon, Inc. is a provider of security software aimed at protecting
individuals and businesses from personal identity theft and trade secret
theft. WhiteCanyon's proven hard drive sanitizing software solution,
WipeDrive, listed in the top five disk sanitizing tools by the U.S. Department
of Defense, and individual file scanning and deletion utility, SecureClean,
have increasingly become important additions to the software suites of
individual users and corporate customers alike. WhiteCanyon's customer base
spans individuals, small to medium-size businesses, Fortune 500 companies and
government institutions. Its products can be found in leading retailers such
as Staples, Best Buy, CompUSA, Fry's, Amazon.com, and MicroCenter.

     Channel Access specializes in marketing and distributing utility and
personal productivity software products to retail stores in the United Sates
and Canada.  Channel Access also distributes utility software for GetData, an
Australian software manufacturer.

Competitive Business Conditions
-------------------------------

     Ascendant TSG competes against a number of consulting companies for its
services. Its competitors include the large international Public Accounting
firms, such as Earnst & Young LLP, PriceWaterhouseCoopers, Deloitte Touche
Tohmatsu, and KPMG. LLP.  And it must manage not only its process but the
quality of the staff used for ongoing processes to compete with larger
companies.

     Stellar competes against several hundred small companies that provide
foreign software developers on a contract basis.  Not only must Stellar
compete for contracts, there is competition for qualified staffing, both
temporary and permanent.  With the advancing technologies, both staffing and
software development require advanced education techniques to keep up
workforce productivity.

     Recording Artists Worldwide proposes to compete for the advertising
dollars of nationally branded entities desiring to market to music fans.
Recording Artists Worldwide proposes to compete indirectly with existing major
record labels and independent production companies, as well as the
distributors and retailers who make music available to the public.  This also
includes online vendors of downloadable music such as Apple and Best Buy.

Customers
----------

     During the year ended December 31, 2004, we generated a total of $181,450
in revenues through our Ascendant TSG subsidiary.  Approximately 80% of
Ascendant TSG's sales revenue in 2004 was generated through transactions with
a single entity, Sterling Chemicals, Inc.   On January 1, 2005 Sterling
Chemicals, Inc., terminated its relationship with Ascendant TSG. It is likely
that Ascendant TSG will not remain profitable in 2005, nor will it generate
revenues comparable to 2004, unless other customers can be secured.

     Stellar's customer list includes three entities comprising greater than
10% of total revenues each.  These entities are PDS Information Services,
Executive Software International, Inc. and Adea Solutions.  In addition,
Stellar has client relationships with some higher-profile entities such as
Verizon, American Express, Hewlett-Packard, Perot Systems and Ericsson.


<PAGE> 11


Intellectual Property and Proprietary Rights
--------------------------------------------

     We currently hold two registered U.S. trademarks.  The mark "SMART ONE,"
Trademark Registration 2095594, was registered on September 9, 1997.  The mark
"SMART ENTERPRISE," Trademark Registration 2267846, was registered on August
3, 1999.

Research and Development
------------------------

     We have not performed any significant research or development of our
technology in either of the last two fiscal years. We will need to raise
additional capital to fund the research and development needed to make the
technology fully functional and marketable.

Employees
---------

     As of December 31, 2004, we had 18 employees.


                           RISK FACTORS

     The risks and uncertainties described below are not the only ones we face
and there may be additional risks that are not presently known or are
currently deemed immaterial. All of these risks may impair business
operations. Our present and proposed business operations are  highly
speculative and subject to the same types of risks inherent in any new or
unproven venture, as well as risk factors particular to the industries in
which it will operate, and will include, among other things, those types of
risk factors outlined below.

Our Auditors Have Issued a Going Concern Opinion

     The independent auditor's report states that our consolidated financial
statements have been prepared assuming that we will continue as a going
concern. And that, as discussed in Note 6 to the consolidated financial
statements, our deficit in working capital and recurring losses raise
substantial doubt about our ability to continue as a going concern.  Our plans
concerning these matters are also described in Note 6.  The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty. We believe that the acquisition of additional
profitable subsidiaries in 2005 will allow us to continue as a going concern.

     If we do not raise substantial capital in the near future, we will not be
     able to finalize our acquisitions, or move forward with our business
     acquisition strategy.

     Our acquisitions of Corazong, R.S. Entertainment and White Canyon are
each contingent on us providing a substantial amount of cash.  If we do not
raise the required capital to finance the growth or in other cases redeem the
preferred shares issued, the sellers may elect to unwind the transactions.  If
we do not raise these funds, our acquisitions may not close and we may not be
able to pursue our business plan in the entertainment industry.  Additionally,
if we do not provide enough cash to close the acquisitions, we may also have
to pay liquidated damages.


<PAGE> 12


     We do not currently have an agreement to raise the necessary capital to
finalize our acquisitions.  This capital may not be available on terms
acceptable to us, or at all.  If we do raise the required capital, our
business may fail.

     If we do not raise substantial capital, we will not be able to fund our
     business plan.

     Over the course of the next twelve months, we anticipate that we will
continue to move forward with our business plan which includes the acquisition
of certain profitable business entities.  Although we expect that these
acquisitions will require consideration primarily in the form of common stock,
they may also entail significant capital outputs.  We believe the additional
capital required to execute such transactions will be made available through
the revenue streams of the acquired entities.  However, despite the fact that
we had recently acquired several new entities that have historically generated
significant revenues and even reported overall net income from operations, we
may still require additional capital in order to continue to expand our
operations according to our business plan.  Therefore, we will be dependent on
funds raised through equity or debt offerings.  Sufficient financing may not
be available on terms favorable to us or at all.  If these funds are not
available, we may not be able to execute our business plan or take advantage
of business opportunities.  If we do not obtain additional capital or are not
able to increase cash flow, our business may fail.

     Our subsidiary Ascendant TSG lost a primary customer ,Sterling Chemcials,
which accountanted for approximately 80% of Ascendant TSG's revenues.  As of
April 15, 2005, Ascendant TSG had not found other customers to replace those
revenues. if it does not find new customers, will likely not be profitable and
its business may fail.

     We need substantial capital to fund our business plan

     Over the course of the next twelve months, we anticipate that we will
continue to move forward with our business plan which includes the acquisition
of certain profitable business entities.  Although we expect that these
acquisitions will require consideration primarily in the form of common stock,
they may also entail significant capital outputs.  We believe the additional
capital required to execute such transactions will be made available through
the revenue streams of the acquired entities.  However, despite the fact that
we had recently acquired several new entities that have historically generated
significant revenues and even reported overall net income from operations, we
may still require additional capital in order to continue to expand our
operations according to our business plan.  Therefore, we will be dependent on
funds raised through equity or debt offerings.  Sufficient financing may not
be available on terms favorable to us or at all.  If these funds are not
available, we may not be able to execute our business plan or take advantage
of business opportunities.  If we do not obtain additional capital or are not
able to increase cash flow, our business may fail. Also the terms of certain
acquisitions provide that if we do not raise the required capital to finance
the growth or in other cases redeem the preferred shares issued, the sellers
may elect to unwind the transactions.


<PAGE> 13


      Risk that our Common Stock may be deemed a "Penny Stock."

     Our common stock may be deemed to be a "penny stock" as that term is
defined in Rule 3a51-1 of the Exchange Act of 1934.  Penny stocks are stocks
(i) with a price of less than five dollars per share; (ii) that are not traded
on a "recognized" national exchange; (iii) whose prices are not quoted on the
NASDAQ automated quotation system, NASDAQ-listed stocks must still meet
requirement (i) above; or (iv) of an issuer with net tangible assets of less
than US$2,000,000, if the issuer has been in continuous operation for at least
three years, or US$5,000,000, if in continuous operation for less than three
years, or with average annual revenues of less than US$6,000,000 for the last
three years.

      A principal exclusion from the definition of a penny stock is an equity
security that has a price of five dollars or more, excluding any broker or
dealer commissions, markups or markdowns.  As of the date of this report our
common stock has a price less than five dollars.

      If our common stock is at any time deemed a penny stock, section 15(g)
and Rule 3a51-1 of the Exchange Act of 1934 would require broker-dealers
dealing in our common stock to provide potential investors with a document
disclosing the risks of penny stocks and to obtain a manually signed and dated
written receipt of the document before effecting any transaction in a penny
stock for the investor's account. Potential investors in our common stock are
urged to obtain and read such disclosure carefully before purchasing any
shares that are deemed to be "penny stock."

      Moreover, Rule 15g-9 of the Exchange Act of 1934 requires broker-dealers
in penny stocks to approve the account of any investor for transactions in
such stocks before selling any penny stock to that investor. This procedure
requires the broker-dealer to (i) obtain from the investor information
concerning his or her financial situation, investment experience and
investment objectives; (ii) reasonably determine, based on that information,
that transactions in penny stocks are suitable for the investor and that the
investor has sufficient knowledge and experience as to be reasonably capable
of evaluating the risks of penny stock transactions; (iii) provide the
investor with a written statement setting forth the basis on which the
broker-dealer made the determination in (ii) above; and (iv) receive a signed
and dated copy of such statement from the investor, confirming that it
accurately reflects the investor's financial situation, investment experience
and investment objectives. Compliance with these requirements may make it more
difficult for investors in our common stock to resell their shares to third
parties or to otherwise dispose of them.

     Competition.

     There are several corporations, firms, and individuals engaged in the
type of business activities in which we are presently engaged. Many of these
entities are more experienced and possess substantially greater financial
wherewithal, and technical and personnel resources than either we or our
subsidiaries do. Some of our competitors have longer operating histories. In
addition, certain of our competitors offer a wider range of products than us,
and thus may be able to respond more quickly to new or changing opportunities,
technologies and customer requirements. Certain of our competitors also have
greater name recognition and larger customer bases that could be leveraged,
thereby making it difficult for us to gain market share.  Such competitors
could conduct more extensive promotional activities and offer better terms and
lower prices to customers than we can.


<PAGE> 14


     In certain instances, we are competing with such organizations for the
same customers. In addition, competition among software developers exists for
experienced technical and other personnel. There can be no assurance that we
will be able to compete effectively with current or future competitors or that
such competition will not have a material adverse effect on our business,
financial condition, and operating results. While we hope to be competitive
with other companies, there can be no assurance that such will be the case.

     Competition - Film and Music Production.

     As independent music labels create profitability or significant market
share, a huge conglomerate company buys it and with the current Oligopoly in
the music industry narrowing, the competition becomes more intense. With the
huge merger between EMI and Time Warner, the Big Six has become the Big Five,
further intensifying efforts to compete for smaller, independent labels.
Technology is another major factor in determining which companies will become
the leaders.  Only those with major funding will be able to stay ahead and
predict rising trends for new technologies and compete with the major
conglomerates.

     In film distribution, the sexopoly of Viacom, Fox, NBC Universal, Time
Warner, Sony and Disney present pervasive cooperation that prevents
competition from smaller companies in established markets.  The creation of
"clearinghouses" further pressures competition as the larger studios have
become owners of intellectual copyrights, distributors for those same rights
and banks for the creation of future rights.  Without ample funding dollars,
the smaller distribution houses, including our own, must compete for a smaller
portion of entertainment dollars.

     Volatile and Limited Market for Common Stock.

     The market price of our Common Stock has been and is likely to continue
to be highly volatile and subject to wide fluctuations due to various factors,
many of which are beyond our control. In addition, there have been large price
and volume fluctuations in the stock market, which have affected the market
prices of securities of many companies, often unrelated to the operating
performance of such companies. These broad market fluctuations, as well as
general economic and political conditions, may adversely affect the market
price of our common stock. In the past, volatility in the market price of a
company's securities has often led to securities class action litigation. Such
litigation could result in substantial costs and diversion of our attention
and resources, which could have a material adverse effect on our business,
financial condition and operating results.

     Dependence on Key Employees and Need for Additional Management and
     Personnel.

     Historically, we have been heavily dependent on the ability of Gary F.
Kimmons who has contributed essential technical and management experience.
The loss of Mr. Kimmons' services would have a material adverse effect on our
business.  However, Mr. Kimmons' interests are closely aligned with those of
the Company due to his large ownership interest in the Company.  We may not be
able to employ qualified persons on acceptable terms to replace Mr. Kimmons
should he become unavailable.


<PAGE> 15


    In the event of future growth in administration, marketing, manufacturing
and customer support functions, we may have to increase the depth and
experience of its management team by adding new members.  Our success will
depend to a large degree upon our ability to identify, hire and retain
additional qualified personnel, particularly those in the field of computer
programming.  We may not be able to recruit such qualified personnel to enable
it to conduct its proposed business successfully.

     Risks Associated with Acquisitions.

     We may acquire other companies or technologies and we regularly evaluate
such opportunities. Acquisitions entail numerous risks, including difficulties
in the assimilation of acquired operations and products, diversion of
management's attention from other business concerns, amortization of acquired
intangible assets; and potential loss of key employees of acquired companies.
We have limited experience in assimilating acquired organizations into our
operations.

     We may not be able to integrate successfully any operations, personnel,
services or products that we might acquire in the future. Failure to
successfully assimilate acquired organizations could have a material adverse
effect on our business, financial condition and operating results. We have
established a number of strategic relationships with online and Internet
service providers and software and information service providers.
Additionally, there can be no assurance that any such relationships will be
maintained, or that if they are maintained, they will be successful or
profitable. The Company may not develop any new such relationships in the
future.

    Our future revenues, if any, and operating results are difficult to
forecast. We believe that period-to-period comparisons of our operating
results will not necessarily be meaningful and they should not be relied on as
any indication of future performance. Our future annual operating results may
not consistently meet the expectations of investors, which in turn may have an
adverse effect on the market price of our Common Stock.

     Risks Associated with Significant Fluctuations in Annual Operating
     Results.

     We expect to experience large fluctuations in future operating results
that may be caused by many factors, including the timing of introductions or
enhancements to our products and services; market acceptance of such newly
introduced or upgraded products or services; the pace of development of the
market for the our products or services; changes in our corporate strategy;
the success of or costs associated with acquisitions, joint ventures or other
strategic relationships; changes in key personnel; seasonal trends; changes in
the level of operating expenses to support projected growth; and general
economic conditions.

     Risks Associated with Management of a Changing Business.

     We expect operating expenses and staffing levels to increase
substantially in the future. In particular, we intend to hire a significant
number of additional skilled personnel, including persons with experience in
software development, marketing and sales.  Competition for such personnel is
intense, and there can be no assurance that the Company will be able to find
or keep additional suitable persons in the future.  The Company expects that
future expansion will continue to challenge the Company's ability to
successfully hire and retain associates.


<PAGE> 16


     If our revenues do not keep up with operating expenses, our production
and release of new and upgraded products do not meet increasing demands, the
Company fails to attract, assimilate and retain qualified personnel, or the
Company fails to manage the Company's expansion effectively, there could be a
material adverse effect on the Company's business, financial condition and
operating results. The rapid growth in the use and demand for the Company's
software products may strain the Company's ability to adequately expand.

     Risks Associated with Delays in Introduction of New Services.

     In 2004, 100% of our revenues were derived from providing services to our
customers - we did not derive revenues from the sale of products in 2004.
However, our future success depends in part on our ability to develop and
enhance our  products and services. There are significant technical risks in
the development of new products or enhanced services. There can be no
assurance that we will be successful in achieving any of the following:
effectively using new technologies; adapting our products and services to
emerging industry standards; developing, introducing and marketing the
enhancements or new product and services. We may also experience difficulties
that could delay or prevent the development, introduction or marketing of any
new products or services.  Additionally, any new products or services may not
adequately meet the requirements of the marketplace or achieve market
acceptance. If we are unable to develop and introduce enhanced or new products
and services quickly enough to respond to market or customer requirements, or
if they do not achieve market acceptance, our business, financial condition
and operating results will be materially adversely affected.

     Risks Associated with Dependence on Intellectual Property Rights.

     We hold registered copyrights for the marks "Smart One" and "Smart
Enterprise."  We intend to seek additional copyright and trademark protection
of our trade names and products.  Our ability to compete depend to a degree on
our  name and product recognition. Accordingly, we expect to rely on
copyright, trade secret and trademark law to protect our product and brand
names of products or under which we conducts business.  Effective trademark
protection may not be available for our trademarks.  We may not be able to
secure significant protection for our trademarks.

     Policing unauthorized use of the our technology is made especially
difficult by the global nature of the Internet and the difficulty in
controlling the ultimate destination or security of software or other data.
The laws of other countries may afford us little or no effective protection
for our intellectual property.

     There can be no assurance that the steps we take will prevent
misappropriation of our technology or that agreements entered into for that
purpose will be enforceable. In addition, litigation may be necessary in the
future to enforce our intellectual property rights; protect our trade secrets;
determine the validity and scope of the proprietary rights of others; or
defend against claims of infringement or invalidity.  Such litigation, whether
successful or unsuccessful, could result in substantial costs and diversions
of resources, either of which could have a material adverse effect on the
Company's business, financial condition and operating results.


<PAGE> 17


     Risks Associated with Entering New Markets.

     One element of the our strategy is to leverage the branding of product
names that the we provides. No assurance can be given that we will be able to
compete successfully in any such new markets. There can be no assurance that
our marketing efforts or our pursuit of any new opportunities will be
successful. If our efforts are not successful, we could realize less than
expected earnings, which in turn could result in a decrease in the market
value of our Common Stock. Furthermore, such efforts may divert
management attention or inefficiently utilize our resources.

      New and Uncertain Markets and Technology; Unproven Market Acceptance.

      Factors that may adversely affect our operating results include, but are
not limited to, our ability to attract consumers/users at a steady rate and
maintain consumer/user satisfaction, our ability to maintain or increase sales
productivity, the introduction of new or enhanced sites and services, the
amount of expenditures for online
advertising by businesses, the level of use of online services and consumer
acceptance of the Internet for services such as those we offer, our ability to
upgrade and develop its systems and the amount and timing of operating costs
and capital expenditures relating to expansion of our business and
infrastructure and general economic conditions.  The markets for our products
and services have only recently begun to develop, are rapidly changing and are
characterized by low barriers to entry. There can be no assurance that the
markets for our products and services will develop at the pace anticipated and
even if the market emerges that it will become economically sustainable.
Additionally, it is becoming increasingly important that strategic
relationships with larger, more financially sound, and well-known entities be
entered into to obtain exposure to a large number of users, sponsors and
advertisers.  There is no assurance that these strategic relationships can be
developed and agreements entered into.

     Substantial Future Sales of Stock; Dilution.

     We anticipate that we will have to issue substantial amounts of our
stock, common or preferred.  Sales of substantial amounts of stock will have a
material dilutive effect on shareholders.  Additionally, it may be necessary
to offer warrants or options to raise additional capital.  All of these
issuances will dilute the holdings of existing shareholders thereby reducing
such holder's percentage ownership.

     Risk of Technological Obsolescence.

     We operate in an ever-evolving field.  Developments are expected to
continue at a rapid pace in the industry in general.  Competition from other
producers, large companies, joint ventures, research and academic institutions
and others is intense and expected to increase.  Many of these companies and
institutions have substantially greater capital resources, research and
development staffs and facilities than we do, and many have substantially
greater experience in conducting testing, manufacturing and
marketing of products.  These entities represent significant long-term
competition for us.  There can be no assurance that developments by others
will not render our technologies and future products obsolete or
noncompetitive.  In addition, our competitors might succeed in developing
technologies and products that are more effective than those that are being
developed by us or that would render our technology and products obsolete or
noncompetitive.  See "Business - Competitive Business Conditions."


<PAGE> 18


     Decreasing Prices for Software.

     In the last few years the average price for some categories of software
have fallen tremendously.  If this trend should affect our software, the
traditionally high margins will be eroded which will be passed on to us in the
form of lower revenues.  There can be no guarantee that the price of the
software utilizing our technology will not decline over the short-term future.
Further, competition may cause us or those who utilize our technologies to
lower prices in the future.  It is difficult to raise prices in the industry
even if internal costs increase.

     Technology Changes in the Software Industry are Rapid.

     In the past few years software has been produced on different media and
in a matter of a few short years the industry has seen its software go from
floppy disk to CD-ROM to being offered online.  It cannot be known if we will
be able to rapidly and effectively make the necessary adjustment with our
business practices to keep pace and stay competitive in the marketplace.

     Limited Current Sales and Marketing Capability.

     We have limited experience in sales, marketing and distribution. To
market our products and services, we must both hire and retain the necessary
personnel to distribute and market the product or enter into collaborative
arrangement or distribution agreements with third parties who will market such
products or develop its own marketing and sales force with technical expertise
and supporting distribution capability.  There can be no assurance that we
will be able to hire or retain the personnel with sufficient experience and
knowledge to distribute and market its products or be able to enter into
collaborative or distribution arrangements or develop its own sales force, or
that such sales and marketing efforts, including the efforts of the companies
with which we enter into agreements will be successful.

     History of Losses; Uncertainty of Future Profitability.

     From our inception in October, 1993 through December 31, 2004, we have an
accumulated stockholders' deficit totaling approximately $45,900,000, and have
reported a net loss in each of the past several years.  Despite our history of
losses, management believes that the recent acquisitions of operating
companies will result in the overall profitability of the consolidated entity.
Although we believe these acquisitions will significantly strengthen our
financial position, the realization of our plan of operation may require the
commitment of substantial capital resources, to be used to consummate business
acquisitions and to increase advertising, marketing, and additional
development activities.  These expenditures are expected to be substantial in
size, and may result in continued losses over the next years.  We may incur
substantial and continuing net losses and we may never reach profitability.
Furthermore, our products and services may not meet the expectations and
effectiveness required to be competitive in the market place, we may not enter
into arrangements for product development and commercialization, we may not be
able to successfully market our products, and our products may not achieve
customer acceptance.


<PAGE> 19


Item 2.    Description of Property.

      On October 1, 2004, we entered into a sublease agreement with 432 Group,
LLC to lease office space at in New York, NY.  The term of the lease began
October 1, 2004 and ends in December, 2005.  Monthly rent on the office space
totals $2,250.  However, 432 Group granted us a temporary rent credit of
$1,125 for the months of October through December 2004, which total temporary
rent credit of $3,375 will be payable in equal monthly installments over the
immediately subsequent 12 months. Accordingly, the monthly rent for January
2005 through December, 2005 shall be 2,588.


Item 3.    Legal Proceedings.

     Texas Workforce Commission.  On February 10, 2000, the Texas Workforce
Commission placed an administrative lien on us in the amount of $109,024 in
connection with a claim for unpaid compensation by our former employees.

     Awalt Group, Inc.  Awalt Group, Inc. commenced litigation against us in
January 2004 in the United States District Court, Southern District of Texas,
Houston Division (Cause No. H-03-5832).  This case relates to advertising and
promotional services rendered prior to July, 1999.  The Plaintiff is
requesting $77,189 for actual amounts invoiced and $10,000 in attorney's fees.
Per their invoices, these are for services rendered from May 26, 1998 through
June 15, 1999.  We filed an answer and are defending the lawsuit under Section
16.004 of the Texas Civil Practice and Remedies Code, i.e., we believe that
the statute of limitations has tolled the claim.  The case was dismissed by
the Federal court in 2005 but the plaintiffs have indicated the intention of
re-filing in state court.

     11500 Northwest, L.P.  11500 Northwest, L.P. commenced litigation against
us on October 31, 2003 in the 11th Judicial District Court for Harris County,
Texas (Cause No. 2003-60705).  This case relates to a breach of a lease
agreement allegedly entered into on or about March 5, 1999 for certain office
space we never occupied.  Plaintiff is requesting past due rents of an
unspecified amount, broker's commission of $21,806, tenant improvements of
$51,439, attorney's fees, costs, and prejudgment interest.  We intend to
defend the lawsuit, deny breach of the alleged lease agreement and further
intend to defend under Section 16.004 of the Texas Civil Practice & Remedies
Code, i.e. we believe that the statute of limitations has tolled some or all
of the claims.  The suit was served on April 13, 2004 and no discovery has
been conducted by either side.

     Marathon Oil Company.  A default judgment was taken against us in favor
of Marathon Oil Company on August 31, 1999 in the amount of $326,943
representing past and future rentals under a lease agreement, together with
$7,500 in attorney's fees and post judgment interest at 10% per annum until
paid.  Credit towards the judgment was ordered for sale of personal property
by the Sheriff or Constable.  We believe the personal property sold for
approximately $28,000.  To the extent that the property was leased during the
unexpired term, it is possible that there would be a mitigation of the damages
claim in our favor.  We believe that some or all of the space was subsequently
rented approximately 90 days later.

     In A lawsuit was filed by Julie Maranto, the former owner of Texas Source
Group, Inc. ("TSG") against us, Texas Source Group, Inc. and Gary Kimmons as
CEO. The cause of action from the pleadings appears to be breach of contract
relating to her employment agreement against TSG, breach of contract,


<PAGE> 20


statutory fraud breach of fiduciary duty, common law fraud and negligent
misrepresentation against GKI. Damages have not been specified. We filed a
Counterclaim for Rescission to unwind the transaction entered into effective
August 19, 2004 based of material misrepresentation of material facts and
fraud. Based on preliminary discovery, we believe that a favorable outcome of
this case for GKI, now M Power, will be reached.

     We are not aware of other claims or assessments, other than as described
above, which may have a material adverse impact on our financial position or
results of operations.


Item 4.    Submission of Matters to a Vote of Security Holders.

     No matter was submitted to a vote of our shareholders during the fourth
quarter of 2004.


                             PART II

Item 5.    Market for Common Equity and Related Stockholder Matters.

     Our common stock is presently traded in the over-the-counter market and
quoted on the National Association of Securities Dealers' OTC Bulletin Board
System under the ticker symbol "GKIG.OB".  The shares are thinly traded and a
limited market presently exists for the shares.

     The following table describes, for the respective periods indicated, the
prices of GK Intelligent Systems, Inc. common stock in the over-the-counter
market, based on inter-dealer bid prices, without retail mark-up, mark-down or
commissions and may not necessarily represent actual transactions. The
quotations have been provided by Pink Sheets LLC, the National Association of
Securities Dealers composite feed or other qualified inter-dealer quotation
medium.

     Fiscal 2004              High          Low
     ------------------------ ------------- --------
     First Quarter (1)        $0.07         $0.03
     Second Quarter   (1)     $0.07         $0.03
     Third Quarter (1)        $0.05         $0.02
     Fourth Quarter (1)       $0.04         $0.02

     Fiscal 2003              High          Low
     ------------------------ ------------- --------
     First Quarter (1)        $0.15         $0.10
     Second Quarter   (1)     $0.16         $0.10
     Third Quarter (1)        $0.16         $0.05
     Fourth Quarter (1)       $0.20         $0.06


Holders
-------

     There were approximately 249 holders of record of our Common Stock as of
April 13, 2005.

Dividends
---------

     We have not declared any cash dividends with respect to our common stock,
and we do not intend to declare dividends in the foreseeable future.


<PAGE> 21


Recent Sales of Unregistered Securities
---------------------------------------

     During the quarter covered by this report ended December 31, 2004, we
issued unregistered and restricted shares of our common stock in the following
transactions:

     1.   In October 2004, we issued 294,117 shares of common stock for
services rendered at $0.04 per share, and an additional 33,583,331 shares for
services at $0.03 per share.

     2.   In November, 2004, we issued 294,117 shares of common stock for
services rendered at $0.03 per share.

     3.   In December 2004, we issued 53,088,234 shares of common stock for
services rendered at $0.02 and $0.03 per share.

     With respect to the issuances of our common stock described above, we
relied on the Section 4(2) and/or 4(6) exemptions from securities registration
under the federal securities laws for transactions not involving any public
offering.  No advertising or general solicitation was employed in offering the
shares.  The shares were sold to sophisticated and/or accredited investors.

     The securities were sold directly by us without the payment of any
commissions or other offering compensation.  No underwriters were engaged to
sell the securities offered.


Item 6.    Management's Discussion and Analysis or Plan of Operation.

     The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto included in Item 7 of this
Form 10-KSB. All information presented herein is based on our fiscal calendar.

Results of Operations
---------------------

     Net revenues for the years ended December 31, 2004 and 2003 were $953,381
and $-0-, respectively.  We had cost of sales of $679,596 in 2004 compared to
$-0- in 2003. These increases resulted from the acquisitions of Ascendant TSG,
Inc. ($80,573) and Stellar Software Networks, Inc. ($599,023) in 2005. We had
operating expenses of $5,791,537 for the year ending December 31, 2004
compared to $1,282,364 for 2003. The increase of $4,509,173 was due chiefly to
the issuance of common stock, stock options, and warrants to various
consultants in connection with our acquisitions and financing efforts and also
the amortization of previously issued instruments in the current year. In
addition, we elected to fully-impair the goodwill associated with our
acquisition of Ascendant TSG, Inc.  This impairment resulted in an impairment
expense of $1,584,865.

     We had interest expense of $79,357 for the year ended December 31, 2004
compared to $174,032 for 2003. The interest is accrued on our unpaid accounts
payable, accrued expenses, and notes payable. The decrease in interest expense
was the result of us negotiating settlements to release portions of our debts.
During the years ended December 31, 2004 and, we recorded a gain on release of
debt due to the passing of the statute of limitations for liabilities incurred
prior to our ceasing operations in 1999.  The gain was $966,581 in 2004
compared to $2,220,782 in the preceding year. Excluding these non cash gains
our net losses would have been $1,392,608 in 2003 compared to a loss of
$5,538,542 in 2004.


<PAGE> 22


Liquidity
---------

     During the year ended December 31, 2004, we used cash of $758,886 in our
operations compared to $257,723 in 2003.  We received $514,998 cash from the
sale of our common stock in 2004 compared to $250,000 in 2003. We borrowed
$251,614 in 2004 and $46,000 in 2003. We made repayments on loans totaling
$68,812 in 2004 compared to $53,746 in 2003.

     We had cash on hand of $54,096 as of December 31, 2004 and $97 at
December 31, 2003.

Trends and Uncertainties
------------------------

     We estimate that we will require approximately $1,000,000 of additional
operating capital in order for us to complete our pending acquisitions. We are
currently seeking additional capital through placements of our equity or debt.
We may not locate such financing on terms acceptable to us or at all.

     We have also committed to raising operating and growth capital for our
newly acquired subsidiaries or for redemption of preferred stock as follows:

1)    WhiteCanyon                   $4,000,000
2)    CoraZong                      $1,500,000
3)    R.S.                          $2,500,000

     On January 1, 2005 Sterling Chemicals, Inc., terminated its relationship
with Ascendant TSG, Inc. It is likely that Ascendant TSG will not remain
profitable in 2005 unless other customers can be secured.


<PAGE> 23


Item 7.     Financial Statements.

     The financial statements filed as a part of this report include:

     Index to Consolidated Financial Statements..........................F-2
     Report of Independent Registered Public Accounting Firm.............F-3
     Consolidated Balance Sheet as of December 31, 2004 .................F-4
     Consolidated Statements of Operations for the years ended
       December 31, 2004 and 2003........................................F-5
     Consolidated Statements of Stockholders' Equity for the years
        Ended December 31, 2004 and 2003.................................F-6
     Consolidated Statements of Cash Flows for the years ended
       December 31, 2004 and 2003.......................................F-10
     Notes to Consolidated Financial Statements.........................F-12





          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES

                CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 2004




<PAGE> 24



                         C O N T E N T S


Report of Independent Registered Public Accounting Firm............. F-3

Consolidated Balance Sheet.......................................... F-4

Consolidated Statements of Operations............................... F-5

Consolidated Statements of Stockholders' Equity (Deficit)........... F-6

Consolidated Statements of Cash Flows............................... F-10

Notes to the Consolidated Financial Statements...................... F-12






                               F-2
<PAGE> 25




     REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     --------------------------------------------------------

To the Board of Directors
GK Intelligent Systems, Inc. and Subsidiaries
New York, New York

We have audited the accompanying consolidated balance sheet of GK Intelligent
Systems, Inc. and Subsidiaries as of December 31, 2004, and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for the years ended December 31, 2004 and 2003.  These consolidated
financial statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits

We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States).  Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation.  We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of GK Intelligent Systems, Inc. and Subsidiaries as of December 31, 2004 and
the results of their operations and their cash flows for the years ended
December 31, 2004 and 2003, in conformity with United States generally
accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern.  As discussed in Note 6 to
the consolidated financial statements, the Company's deficit in working
capital and recurring losses raise substantial doubt about its ability to
continue as a going concern.  Management's plans concerning these matters are
also described in Note 6.  The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.


/S/ HJ & Associates, LLC

HJ & Associates, LLC
Salt Lake City, Utah
April 22, 2005

                               F-3


<PAGE> 26


          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
                    Consolidated Balance Sheet

                              ASSETS


                                                              December 31,
                                                                  2004
                                                              -------------
CURRENT ASSETS

   Cash                                                       $     54,096
   Accounts receivable                                             183,104
   Other current assets                                              3,473
                                                              -------------

     Total Current Assets                                          240,673
                                                              -------------

FIXED ASSETS, NET (Note 2)                                           9,964
                                                              -------------
OTHER ASSETS

   Goodwill                                                        136,839
                                                              -------------

     Total Other Assets                                            136,839
                                                              -------------

     TOTAL ASSETS                                             $    287,476
                                                              =============

          LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES

   Accounts payable (Note 3)                                  $    257,548
   Accounts payable - related parties (Note 3)                       3,697
   Accrued expenses (Note 4)                                       777,634
   Accrued expenses - related parties (Note 5)                      65,681
   Notes payable (Note 2)                                          164,000
   Notes payable - related parties (Note 2)                        232,421
                                                              -------------

     Total Current Liabilities                                   1,500,981
                                                              -------------

     TOTAL LIABILITIES                                           1,500,981
                                                              -------------
COMMITMENTS AND CONTINGENCIES (Note 7)

STOCKHOLDERS' EQUITY (DEFICIT)

   Preferred stock authorized: 10,000,000 preferred shares
     at $0.001 par value; no issued and outstanding                      -
   Common stock authorized: 275,000,000 common shares at $0.001
     par value; 222,546,147 shares issued and outstanding          222,546
   Additional paid-in capital                                   46,590,506
   Stock subscriptions receivable                                 (500,000)
   Accumulated deficit                                         (47,426,557)
                                                              -------------

     Total Stockholders' Equity (Deficit)                       (1,113,505)
                                                              -------------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)     $    387,476
                                                              =============




      The accompanying notes are an integral part of these
                consolidated financial statements.

                               F-4




<PAGE> 27


          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
              Consolidated Statements of Operations



                                                     For the Years Ended
                                                         December 31,
                                                 ---------------------------
                                                       2004         2003
                                                 ------------- -------------

REVENUES                                         $    953,381  $          -

  Cost of sales                                       679,596             -
                                                 ------------- -------------
  Gross margin                                        273,785             -
                                                 ------------- -------------
OPERATING EXPENSES

  Depreciation and amortization                         2,049             -
  Impairment of goodwill (Note 11)                  1,584,865             -
  Payroll expenses                                    707,633       248,874
  Professional fees                                 3,354,318       885,169
  General and administrative                          142,672       148,321
                                                 ------------- -------------

     Total Operating Expenses                       5,791,537     1,282,364
                                                 ------------- -------------

LOSS FROM OPERATIONS                               (5,517,752)   (1,282,364)
                                                 ------------- -------------
OTHER INCOME (EXPENSE)
  Interest expense and loan discount fees             (79,357)     (174,032)
  Gain on release of debt (Note 9)                    966,581     2,220,782
  Gain (loss) on extinguishment of debt (Note 9)      (26,298)       60,788
                                                 ------------- -------------

     Total Other Income (Expense)                     860,926     2,107,538
                                                 ------------- -------------

NET INCOME (LOSS)                                  (4,656,826)      825,124

DIVIDENDS ON PREFERRED STOCK                                -             -
                                                 ------------- -------------
NET INCOME (LOSS) APPLICABLE TO
 COMMON SHAREHOLDERS                             $ (4,656,826) $    825,174
                                                 ============= =============

BASIC INCOME (LOSS) PER SHARE                    $      (0.05) $       0.03
                                                 ============= =============

FULLY DILUTED INCOME (LOSS) PER SHARE            $      (0.05) $       0.03
                                                 ============= =============
BASIC WEIGHTED AVERAGE NUMBER OF
 SHARES OUTSTANDING                                87,679,854    24,058,866
                                                 ============= =============
FULLY DILUTED WEIGHTED AVERAGE NUMBER
   OF SHARES OUTSTANDING                           87,679,854    30,958,916
                                                 ============= =============


       The accompanying notes are an integral part of these
                consolidated financial statements.


                               F-5

<PAGE> 28
<TABLE>
<CAPTION>

                   GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
                  Consolidated Statements of Stockholders' Equity


                            Preferred Stock      Common Stock       Additional
                           ----------------- ---------------------- Paid-in       Subscription Unearned      Accumulated
                            Shares   Amount    Shares      Amount   Capital       Receivable   Compensation  Deficit
                           -------- -------- ------------ --------- ------------- ------------ ------------- -------------

                        <c>      <c>      <c>          <c>       <c>           <c>          <c>           <c>
Balance, December 31, 2002       -  $     -   20,795,039  $ 20,795  $ 39,136,730  $         -  $    (46,900) $(43,594,905)

Warrants issued for
conversion of debt in
January 2003                     -        -            -         -       130,000            -             -             -

Common stock issued in
February 2003 for services
at $0.17 and $0.12 per share     -        -      275,000       275        42,475            -             -             -

Common stock issued in
February 2003 for conversion
of debt at $0.17 per share       -        -      588,235       588        99,412            -             -             -

Common stock issued in
March 2003 for services at
$0.16 per share                  -        -      520,000       520        82,680            -             -             -

Amortization of unearned
compensation                     -        -            -         -             -            -        46,900             -

Common stock issued in April
2003 for cash at $0.25 per
share                            -        -      550,000       550       136,950            -             -             -


Common stock issued in April
2003 for services at $0.15
per share                        -        -      100,000       100        14,900            -             -             -

Common stock issued in May
2003 for the conversion of
debt and for services at
$0.15 per share                  -        -      500,000       500        74,500            -             -             -

Common stock issued in June
2003 for conversion of debt
at $0.18 per share               -        -       33,000        33         5,907            -             -             -
                           -------- -------- ------------ --------- ------------- ------------ ------------- -------------

Balance Forward                  -  $     -   23,361,274  $ 23,361  $ 39,723,554  $         -  $          -  $(43,594,905)
                           -------- -------- ------------ --------- ------------- ------------ ------------- -------------


The accompanying notes are an integral part of these consolidated financial statements.

                                        F-6
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>


                   GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
            Consolidated Statements of Stockholders' Equity (Continued)


                           Preferred Stock      Common Stock       Additional
                           ----------------- ---------------------- Paid-in       Subscription Unearned      Accumulated
                            Shares   Amount    Shares      Amount   Capital       Receivable   Compensation  Deficit
                           -------- -------- ------------ --------- ------------- ------------ ------------- -------------

                        <c>      <c>      <c>          <c>       <c>           <c>          <c>           <c>
Balance Forward                  -  $     -   23,361,274  $ 23,361  $ 39,723,554  $         -  $          -  $(43,594,905)

Common stock issued in
June 2003 for services at
$0.16 per share                  -        -      805,000       805       127,995            -             -             -

Common stock issued in
July 2003 for cash at $0.25
per share                        -        -      350,000       350        87,150            -             -             -

Common stock issued in
August 2003 for services
at $0.15 per share               -        -      300,000       300        44,700            -             -             -

Common stock issued in
September 2003 for services
at $0.10 and $0.15 per share     -        -    1,400,000     1,400       198,600            -      (194,300)            -

Common stock issued in
September 2003 for the
conversion of debt at
$0.17 per share                  -        -      500,000       500        49,500            -             -             -

Common stock issued in
October 2003 for services
at $0.14 and $0.20 per share     -        -      750,000       750       119,250            -             -             -

Common stock issued in
November 2003 for cash at
$0.25 per share                  -        -      100,000       100        24,900            -             -             -

Common stock issuances
cancelled in November 2003       -        -   (1,910,000)   (1,910)      (23,690)           -             -             -
                           -------- -------- ------------ --------- ------------- ------------ ------------- -------------

Balance Forward                  -  $     -   25,656,274  $ 25,656  $ 40,351,959  $         -  $   (194,300) $(43,594,905)
                           -------- -------- ------------ --------- ------------- ------------ ------------- -------------

The accompanying notes are an integral part of these consolidated financial statements.

                                        F-7

</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>
                   GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
            Consolidated Statements of Stockholders' Equity (Continued)



                            Preferred Stock      Common Stock       Additional
                           ----------------- ---------------------- Paid-in       Subscription Unearned      Accumulated
                            Shares   Amount    Shares      Amount   Capital       Receivable   Compensation  Deficit
                           -------- -------- ------------ --------- ------------- ------------ ------------- -------------

                        <c>      <c>      <c>          <c>       <c>           <c>          <c>           <c>
Balance Forward                  -  $     -   25,656,274  $ 25,656  $ 40,351,959  $         -  $   (194,300) $(43,594,905)

Common stock issued in
November 2003 for services
at $0.10 per share               -        -    1,160,000     1,160       134,840            -             -             -

Common stock issued in
December 2003 for services at
$0.08 and $0.09  per share       -        -      745,830       746        63,379            -             -             -

Warrants issued as
compensation to a director       -        -            -         -        24,000            -             -             -

Amortization of unearned
compensation                     -        -            -         -             -            -        59,300             -

Net income for the year
ended December 31, 2003          -        -            -         -             -            -             -       825,174
                           -------- -------- ------------ --------- ------------- ------------ ------------- -------------

Balance, December 31, 2003       -        -   27,562,104    27,562    40,574,178            -      (135,000)  (42,769,731)

Common stock issued for
services at $0.05 and $0.04
per share in  March, 2004        -        -   25,811,788    25,812       944,524            -             -             -

Common stock issued on
exercise of options at $0.08
per share in  April, 2004        -        -    6,944,444     6,944       493,054      (10,000)            -             -

Common stock issued for
cash at $0.02 per share
in April, 2004                   -        -    1,388,888     1,389        23,611            -             -             -

Common stock issued for
debt at $0.05 per share
in April, 2004                   -        -    2,586,549     2,586       126,741            -             -             -
                           -------- -------- ------------ --------- ------------- ------------ ------------- -------------

Balance forward                  -  $     -   64,293,773  $ 64,293  $ 42,162,108  $   (10,000) $   (135,000) $(42,769,731)
                           -------- -------- ------------ --------- ------------- ------------ ------------- -------------


The accompanying notes are an integral part of these consolidated financial statements.

                                        F-8
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
                   GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
            Consolidated Statements of Stockholders' Equity (Continued)


                            Preferred Stock      Common Stock       Additional
                           ----------------- ---------------------- Paid-in       Subscription Unearned      Accumulated
                            Shares   Amount    Shares      Amount   Capital       Receivable   Compensation  Deficit
                           -------- -------- ------------ --------- ------------- ------------ ------------- -------------

                        <c>      <c>      <c>          <c>       <c>           <c>          <c>           <c>
Balance Forward                  -  $     -   64,293,773  $ 64,293  $ 42,162,108  $   (10,000) $   (135,000) $(42,769,731)

Common stock issued for
services at $0.05 per share
in April, 2004                   -        -    4,672,726     4,673       228,964            -             -             -

Common stock issued for
services at $0.05 per
share in May, 2004               -        -      133,333       133         6,533            -             -             -

Common stock issued for
services at $0.05 and $0.04
per share in  June, 2004         -         -   4,518,870     4,519       186,236            -      (160,079)            -

Common stock issued in
acquisition of Stellar
Software Networks, Inc.          -         -   8,025,211     8,025       182,975            -             -             -

Common stock issued for
services at $0.03 per
share in July, 2004              -         -   1,155,462     1,156        33,508            -             -             -

Common stock issued in
acquisition of Texas
Source Group, Inc.               -         -  42,857,143    42,857     1,457,143            -             -             -

Common stock issued for
debt at $0.04 per share
in August, 2004                  -         -     250,000       250         9,750            -             -             -

Common stock issued for
services at  $0.04 and 0.02
per share in  August, 2004       -         -   8,379,831     8,380       270,814            -       (96,000)            -

Common stock issued for
services at $0.04 per share
In September, 2004               -         -   1,294,117     1,294        50,471            -        (5,434)            -

Cash received on
subscription receivable          -         -           -         -             -       10,000             -             -

Common stock issued on
immediate exercise of
options at $0.03 per
share in October, 2004           -         -  16,666,665    16,667       483,333     (500,000)            -             -
                           -------- -------- ------------ --------- ------------- ------------ ------------- -------------

Balance forward                  -  $     -  152,247,132  $152,247  $ 45,071,833  $  (500,000) $   (892,630) $(42,769,431)
                           -------- -------- ------------ --------- ------------- ------------ ------------- -------------


The accompanying notes are an integral part of these consolidated financial statements.

                                        F-9
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
                   GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
            Consolidated Statements of Stockholders' Equity (Continued)






                            Preferred Stock      Common Stock       Additional
                           ----------------- ---------------------- Paid-in       Subscription Unearned      Accumulated
                            Shares   Amount    Shares      Amount   Capital       Receivable   Compensation  Deficit
                           -------- -------- ------------ --------- ------------- ------------ ------------- -------------

                        <c>      <c>      <c>          <c>       <c>           <c>          <c>           <c>
Balance Forward                  -  $     -   152,247,132 $152,247  $ 45,071,833  $  (500,000) $   (892,630) $(42,769,731)

Common stock issued for
services at $0.03 and $0.04
per share in  October, 2004      -        -    17,210,782   17,211       502,054            -      (507,500)            -

Common stock issued for
services at $0.03 per share
in November, 2004                -        -       294,117      294         8,529            -             -             -

Common stock issued for
services at $0.03 and $0.02
per share in December, 2004      -        -    52,794,117   52,794     1,008,090            -             -             -

Amortization of unearned
compensation                     -        -             -        -             -            -     1,400,130             -

Net loss for the year ended
December 31, 2004                -        -             -        -             -            -             -    (4,656,826)
                           -------- -------- ------------ --------- ------------- ------------ ------------- -------------

Balance, December 31, 2004       -  $     -   222,546,148 $222,546  $ 46,590,506  $  (500,000) $          -  $(47,426,557)
                           ======== ======== ============ ========= ============= ============ ============= =============


The accompanying notes are an integral part of these consolidated financial statements.

                                       F-10

</TABLE>
<PAGE> 33
<TABLE>
<CAPTION>

             GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
                 Consolidated Statements of Cash Flows



                                                                   For the Years Ended
                                                                       December 31,
                                                              -----------------------------
                                                                    2004          2003
                                                              -------------- --------------
<S>                                                           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES

 Net income (loss)                                            $  (4,656,826) $     825,174
 Adjustments to reconcile net income (loss) to net cash
  used by operating activities:
   Depreciation and amortization                                      2,049              -
   (Gain) loss on release of debt                                  (966,581)    (2,220,782)
   (Gain) loss on extinguishments of debt                            26,298        (60,788)
   Amortization of unearned compensation                          1,400,130        106,200
   Impairment of goodwill                                         1,584,865              -
   Issuance of common stock, options and warrants for services    1,926,918        695,423
 Changes in assets and liabilities:
   Increase in accounts receivable                                  (45,115)             -
   (Increase) decrease in other current assets                        3,003         (6,476)
   Increase in accounts payable and accrued expenses                 57,220         18,225
   Increase in accrued liabilities - related parties                (90,847)       385,301
                                                              -------------- --------------

      Net Cash Used by Operating Activities                        (758,886)      (257,723)
                                                              -------------- --------------

CASH FLOWS FROM INVESTING ACTIVITIES                                      -              -
                                                              -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES

 Common stock issued for cash                                       514,998        250,000
 Proceeds from issuance of notes payable                             97,000         46,000
 Payments on notes payable                                          (14,512)             -
 Proceeds from notes payable - related party                        154,614              -
 Payments on notes payable- related party                           (54,300)       (53,746)
 Cash received on acquisition of subsidiaries                       105,085              -
 Cash received on subscription receivable                            10,000              -
                                                              -------------- --------------

      Net Cash Provided by Financing Activities                     812,885        242,254
                                                              -------------- --------------

NET INCREASE (DECREASE) IN CASH                                      53,999        (15,469)

CASH AT BEGINNING OF PERIOD                                              97         15,566
                                                              -------------- --------------

CASH AT END OF PERIOD                                         $      54,096  $          97
                                                              ============== ==============



The accompanying notes are an integral part of these consolidated financial statements.

                                 F-11

</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>

             GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
           Consolidated Statements of Cash Flows (Continued)



                                                                   For the Years Ended
                                                                       December 31,
                                                              -----------------------------
                                                                    2004          2003
                                                              -------------- --------------
<S>                                                           <C>            <C>

SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES

 Cash Paid For:

   Income taxes                                                $          -  $           -
   Interest                                                    $          -  $       2,255

 Schedule of Non-Cash Financing Activities:

   Common stock issued for debt                                $    276,968  $     304,492
   Common stock, warrants, and options issued for services     $  1,926,918  $     695,423
   Common stock issued for acquisitions of subsidiaries        $  1,691,000  $           -




The accompanying notes are an integral part of these consolidated financial statements.

                                 F-12

</TABLE>
<PAGE> 35

          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
          Notes to the Consolidated Financial Statements
                    December 31, 2004 and 2003


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of GK Intelligent Systems,
Inc. ("GK") and its wholly-owned subsidiaries is presented to assist in
understanding the Company's consolidated financial statements.  Collectively,
these entities are referred to as "the Company". The consolidated financial
statements and notes are representations of the Company's management, which is
responsible for their integrity and objectivity.  These accounting policies
conform to accounting principles generally accepted in the United States of
America, as well as standards of the Public Company Accounting Oversight Board
(United States) and have been consistently applied in the preparation of the
consolidated financial statements.

a.  Business

GK Intelligent Systems, Inc. ("the Company"), is an operating entity
incorporated in Delaware in 1988, under the name "Technicraft Financial, Ltd."
Pursuant to an agreement effective August 1994, the Company acquired GK
Intelligent Systems, Inc., a Texas corporation, and, the Company changed its
name to GK Intelligent Systems, Inc. Through 1999 the company was principally
engaged in the development and marketing of software products capable of
interaction with and adaptation to the needs of software users and
interpretation of data.

In June 2002, the Company, which had been dormant for three years, commenced
the process of reestablishing business operations.  During 2003, the Company
formed three new wholly-owned subsidiary companies, Smart One Learning
Systems, Inc. (SOLS), Recording Artists Worldwide, Inc. (RAWW) and True
Baseball Club, Inc. (TBC) all for the purpose of providing various business
opportunities and uses for the Company's software and products.  As of
December 31, 2004, none of these subsidiaries have conducted any formal
business operations.

On July 16, 2004, the Company issued 8,025,211 restricted shares of common
stock to an unrelated individual in connection with the acquisition of Stellar
Software Network, ("Stellar").  Stellar is a provider of professional software
services, offering custom software development, systems integration, and IT
staffing services.

On August 17, 2004, the Company issued 42,857,143 shares of common stock in
the acquisition of Texas Source Group, Inc., dba Ascendant TSG, ("TSG").  TSG
is a Houston-based full-service provider of collaborative e-business process
software, process consulting, and web development and hosting services.

Currently, the Company has initiated a merger and acquisition strategy with a
focus on business opportunities in the music and entertainment markets.  A
primary aspect of this strategy is serving as a holding company that acquires
private operating entities interested in growing and that view the public
venue as a viable strategy for securing growth capital and professional
support.

The Company currently operates through its wholly-owned subsidiaries in the
technology staffing and software support industries.

b.  Accounting Method

The Company has adopted a calendar year-end.  The Company's consolidated
financial statements are prepared using the accrual method of accounting.


                               F-13

<PAGE> 36


          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
          Notes to the Consolidated Financial Statements
                    December 31, 2004 and 2003


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

c. Income (Loss) Per Share

The computation of basic loss per share of common stock is based on the
weighted average number of shares outstanding during the period of the
consolidated financial statements.  Fully diluted income (loss) per share
calculations are not presented for year in which a loss is incurred as any
stock equivalents are antidilutive in nature.  The Company has excluded
4,500,050 of common stock equivalents at December 31, 2004, and has included
6,900,050 of common stock equivalents at December 31, 2003.


                                                For the Year Ended
                                                December 31, 2004
                                       -------------------------------------
                                          Income      Shares      Per Share
                                       (Numerator) (Denominator)    Amount
                                       ------------ ------------ ------------
      Basic                            $(4,656,826)  87,679,854  $   (0.05)
                                       ============ ============ ============
      Fully Diluted                    $(4,656,826)  87,679,854  $   (0.05)
                                       ============ ============ ============

                                                For the Year Ended
                                                December 31, 2003
                                       --------------------------------------
                                          Income      Shares       Per Share
                                       (Numerator) (Denominator)    Amount
                                       ----------- ------------- ------------

      Basic                            $  825,174    24,058,866  $     0.03
                                       =========== ============= ============
      Fully Diluted                    $  825,174    30,958,916  $     0.03
                                       =========== ============= ============


d.   Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period.  Actual results could differ from
those estimates.

e. Principles of Consolidation

The consolidated financial statements presented are those of GK Intelligent
Systems, Inc. and its wholly-owned operating subsidiaries, Stellar Software
Network ("Stellar") and Texas Sourc Group, Inc., dba Ascendant TSG. ("TSG").
The Company's other wholly-owned subsidiaries, Smart One Learning Systems,
Inc. (SOLS), Recording Artists Worldwide, Inc. (RAWW) and True Baseball Club,
Inc. (TBC), have not yet conducted any formal business operations. All
significant intercompany transactions have been eliminated.



                               F-14
<PAGE> 37


          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
          Notes to the Consolidated Financial Statements
                    December 31, 2004 and 2003


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

f. Revenue Recognition

During the year ended December 31, 2004 the Company earned revenues from
technical staffing and general business support services.  The Company
recognizes such revenues when services have been performed, collections are
reasonably assured and no further obligations exist for the Company.  Pursuant
to EITF 99-19, the revenues associated with the Company's staffing business
are recorded on a gross basis, with staff compensation expensed as cost of
sales.  Due to the fact that the Company establishes the price of its
services, maintains risk of non-collection, and is the primary obligor in its
business arrangements, management has determined that recording revenues at
gross values is the appropriate accounting treatment.

g. New Accounting Pronouncements

The Company anticipates adopting the following accounting pronouncements:
SFAS No. 123(R) -- In December 2004, the FASB issued SFAS No. 123 (Revised
2004) (SFAS 123 (R)) "Share-based payment". SFAS 123 (R) will require
compensation costs related to share-based payment transactions to be
recognized in the financial statements. With limited exceptions, the amount of
compensation cost will be measured based on the grant-date fair value of the
equity or liability instruments issued. In addition, liability awards will be
re-measured each reporting period. Compensation cost will be recognized over
the period that an employee provides service in exchange for the award. FASB
123 (R) replaces FASB 123, Accounting for Stock-Based Compensation and
supersedes APB option No. 25, Accounting for Stock Issued to Employees. This
guidance is effective as of the first interim or annual reporting period after
December 15, 2005 for Small Business filers.

SFAS No. 151 -- In November 2004, the FASB issued SFAS No. 151 (SFAS 151),
"Inventory Costs". SFAS 151 amends ARB No. 43, Chapter 4. This statement
clarifies the accounting for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage). SFAS 151 is the
result of a broader effort by the FASB and the IASB to improve financial
reporting by eliminating certain narrow differences between their existing
accounting standards. This statement is effective for inventory costs incurred
during fiscal years beginning after June 15, 2005. The adoption of SFAS 151
will not have a material impact on the results of operations or financial
position of the company as it does not have inventory.

SFAS No. 153 -- In December 2004, the FASB issued SFAS No. 153 (SFAS 153)
"Exchange of Non-monetary assets". This statement was a result of a joint
effort by the FASB and the IASB to improve financial reporting by eliminating
certain narrow differences between their existing accounting standards. One
such difference was the exception from fair value measurement in APB Opinion
No. 29, Accounting for Non-Monetary Transactions, for non-monetary exchanges
of similar productive assets. SFAS 153 replaces this exception with a general
exception from fair value measurement for exchanges of non-monetary assets
that do not have commercial substance. A non-monetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. This statement is effective for
non-monetary assets exchanges occurring in fiscal periods beginning after June
15, 2005. The adoption of SFAS 153 will not have a material effect on the
Company's financial position or results of operations.


                               F-15

<PAGE> 38


          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
          Notes to the Consolidated Financial Statements
                    December 31, 2004 and 2003



NOTE 1 -  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

g.   Newly Issued Accounting Pronouncements (Continued)

FASB Interpretation No. 46(R) -- In January 2003, the FASB issued FASB
Interpretation No. 46 "Consolidation of Variable Interest Entities." FIN 46
provides guidance on the identification of entities for which control is
achieved through means other than through voting rights, variable interest
entities, and how to determine when and which business enterprises should
consolidate variable interest entities. This interpretation applies
immediately to variable interest entities created after January 31, 2003. It
applies in the first fiscal year or interim period beginning after June 15,
2003, to variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003. The adoption of FIN 46 did
not have a material impact on the Company's financial statements.

h. Provision for Taxes

Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss and tax
credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences.  Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases.  Deferred tax
assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the
deferred tax assets will not be realized.  Deferred tax assets and liabilities
are adjusted for the effects of changes in tax laws and rates on the date of
enactment.

Net deferred tax assets consist of the following components as of December 31,
2004 and 2003:

                                                        2004         2003
                                                  ------------- --------------
      Deferred tax assets:
        NOL Carryover                             $ 12,509,980  $  12,300,035
        Related Party                                   39,700         50,160
                                                  ------------- --------------

                                                    12,549,680     12,350,195
      Deferred tax liabilities:
        Deferred compensation                                -              -
        Related party                                        -              -

      Valuation allowance                          (12,549,680)   (12,350,195)
                                                  ------------- --------------
      Net deferred tax asset                      $          -  $           -
                                                  ============= ==============


                               F-16

<PAGE> 39


          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
          Notes to the Consolidated Financial Statements
                    December 31, 2004 and 2003



NOTE 1 -  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

h. Provision for Taxes (Continued)

The income tax provision differs from the amount of income tax determined by
applying the U.S. federal and state income tax rates of 39% to pretax income
from continuing operations for the years ended December 31, 2004 and 2003 due
to the following:

                                                   2004          2003
                                             -------------- --------------
     Book income (loss)                      $  (2,011,170) $     321,820
     Other                                           1,525            867
     Impairment                                    618,095              -
     Related party accruals                              -        (59,880)
     Stock for services / options expense        1,151,325        271,215
     Late fees                                      30,490              -
     Loss on debt                                   10,250              -
     NOL Utilization                                     -       (534,022)
     Valuation allowance                           199,485              -
                                             -------------- --------------
                                             $           -  $           -
                                             ============== ==============



At December 31, 2004, the Company had net operating loss carryforwards of
approximately $32,000,000 that may be offset against future taxable income
from the year 2004 through 2024. No tax benefit has been reported in the
December 31, 2004 financial statements since the potential tax benefit is
offset by a valuation allowance of the same amount.

Due to the change in ownership provisions of the Tax Reform Act of 1986, net
operating loss carryforwards for Federal income tax reporting purposes are
subject to annual limitations.  Should a change in ownership occur, net
operating loss carryforwards may be limited as to use in future years.

i. Long-Lived Assets

In accordance with SFAS No. 142 and SFAS No. 144, long-lived assets, including
goodwill associated with other long-lived assets, are evaluated for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable.

The amount of any impairment considered necessary would be determined by
comparing the book value of the net assets in the applicable line of business
to fair value using methods such as the present-value of estimated future cash
flows, sale value or other valuation methodologies available at the time,
depending on the stage of development of the line of business and the
Company's intentions at the time an impairment adjustment were considered
necessary.

j. Advertising

The Company follows the policy of charging the costs of advertising to expense
as incurred.  The Company had no significant advertising expense for the years
ended December 31, 2004 and 2003.


                               F-17

<PAGE> 40

          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
          Notes to the Consolidated Financial Statements
                    December 31, 2004 and 2003


NOTE 1 -  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 (Continued)

k. Computer Software Costs

Costs of internally created computer software products are charged to expense
when incurred as research and development until technological feasibility has
been established for the product. Technological feasibility is considered
established upon completion of a detailed program design or, in its absence,
completion of a working model. Thereafter, all software production costs are
capitalized and subsequently reported at the lower of unamortized cost or net
realizable value. Capitalized costs are amortized based on the ratio of
current revenue to current and future revenue for each product with an annual
minimum equal to the straight-line amortization over the remaining estimated
economic life of the product.

l. Fair Value of Financial Instruments

The carrying amounts of the Company's financial instruments, including cash
and cash equivalents, accounts payable, and accrued liabilities, approximate
fair value due to their short maturities.

m.  Stock-Based Compensation

The Company has chosen to continue to account for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees", and related
Interpretations and to elect the disclosure option of SFAS No. 148,
"Accounting for Stock-Based Compensation". Accordingly, compensation cost for
stock options issued to employees is measured as the excess, if any, of the
quoted market price of the Company's stock at the date of the grant over the
amount an employee must pay to acquire the stock.  The following table
illustrates the effects of net income (loss) and earnings (loss) per share if
the Company had applied the fair value recognition provisions of FASB
Statement No. 123, Accounting for Stock-Based Compensation, to stock-based
employee compensation.

                                                      For the years ended
                                                          December 31,
                                                  ---------------------------
                                                       2004         2003
                                                  ------------- -------------
 Net income (loss), as reported                   $ (4,656,826) $    825,174
 Deduct: Total stock-based employee
   compensation expense determined under
   fair value based method for all awards,
   net of related tax effects                         (157,261)     (433,072)
                                                  ------------- -------------

 Pro forma net income (loss)                      $ (4,814,087) $    392,102
                                                  ============= =============
 Earnings per share:
  Basic and diluted - as reported                 $      (0.05) $       0.03
                                                  ============= =============
  Basic - pro forma                               $      (0.05) $       0.02
                                                  ============= =============
  Diluted - pro forma                             $      (0.05) $       0.01
                                                  ============= =============

                               F-18

<PAGE> 41


          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
          Notes to the Consolidated Financial Statements
                    December 31, 2004 and 2003


NOTE 2 - NOTES PAYABLE

At December 31, 2004, the Company had various unsecured notes payable totaling
$396,421, of which $232,421 was with related parties, bearing imputed interest
rates from 10% to 18% per annum. These notes payable are due on demand.

Interest expense related to these notes payable for the years ended December
31, 2004 and 2003 was $79,357 and $56,610, respectively.

NOTE 3 - ACCOUNTS PAYABLE

Accounts payable consists of normal trade and operating liabilities incurred
since the Company recommenced operations in 2002. Accounts payable incurred
prior to the Company ceasing its operations in June 1999 have been outstanding
for periods exceeding the statute of limitations of four years and have been
determined to be extinguishable and written off as of December 31, 2003. None
of these written-off accounts payable were due to related parties.
Accordingly, a gain of $1,100,753 was recognized during the year ended
December 31, 2003 on the statutory release of these old accounts payable.

NOTE 4 - ACCRUED LIABILITIES

Accrued liabilities as of December 31, 2004 consist of the following:

          Accrued interest                       $    295,984
          Judgments                                   445,542
          Accrued payroll taxes                        36,108
                                                 ------------
                                                 $    777,634
                                                 ============

Accrued liabilities amounting to $1,120,029 originating prior to the Company
ceasing its operations in June 1999 were written off in December 31, 2003 and
were included as part of the gain on release of debt for the year ended
December 31, 2003 on the same basis as accounts payable as discussed in Note
3.  None of the accrued liabilities written-off were due to related parties.
During the 2004 fiscal year, the Company wrote-off $269,542 in accrued
interest and $31,347 in accrued interest due to related parties relating to
notes payable and notes payable to related parties, which were also
written-off during the year.  Of the Company's $966,581 gain on release of
debt, an aggregate $300,889 pertained to accrued interest and accrued interest
payable to related parties.

NOTE 5 - ACCRUED LIABILITIES - RELATED PARTIES

Accrued liabilities due to related parties at December 31, 2004 consists of
accrued interest on notes payable - related parties of $65,681.


                               F-19


<PAGE> 42


          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
          Notes to the Consolidated Financial Statements
                    December 31, 2004 and 2003


NOTE 6 - GOING CONCERN

The Company's consolidated financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business.  However, the Company does not have significant
amounts of cash or other material assets, nor does it have an established
source of revenues to cover its operating costs and to allow it to continue as
a going concern.  The consolidated financial statements do not reflect any
adjustments that might result from the outcome of this uncertainty. It is the
intent of the Company to obtain additional financing through equity offerings
or other feasible financing alternatives to fund its ongoing operations.  The
Company also continues to pursue the development and marketing of its software
to generate sales to cover the Company's working capital needs and software
development expenditures.  In addition, the Company anticipates entering into
various arrangements with compatible operating business.  There is no
assurance that the Company will be successful in raising the needed capital or
that there will be sales of its software.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

In July 1999, the Company was named as a defendant in a lawsuit, Marathon Oil
Company v. GK Intelligent Systems, Inc.  The plaintiff alleged that the
Company failed to pay rent under a lease for office space and was seeking to
recover rental payments in the amount of $78,554. Additionally, the plaintiff
was seeking future rental payments, court costs as well as attorney's fees.
On August 31, 1999, a default judgment was entered against the Company in the
amount of $326,943 plus attorney's fees of $7,500.  The plaintiff subsequently
took possession of the Company's assets and sold them for approximately
$28,000. The Company accrued $306,444 for the judgment and applicable costs in
accrued liabilities.

On October 31, 2003, 11500 Northwest, L.P. commenced litigation against the
Company.  This case relates to a breach of a lease agreement allegedly entered
into on or about March 5, 1999 for certain office space never occupied by the
Company.  The Plaintiff is requesting past due rents of an unspecified amount,
broker's commission of $21,806, tenant improvements of $51,439, attorney's
fees, costs and prejudgment interest.  The Company intends to defend the
lawsuit, and denies breach of the alleged lease agreement. The Company
believes that the statute of limitations has extinguished some or all of the
claims.  The ultimate outcome of this action is not presently determinable.

On February 10, 2000, the Texas Workforce Commission placed an administrative
lien on the Company in the amount of $109,024.  As of the date of this filing
the Company has no evidence to show that this lien has been released.  This
amount is included in accrued liabilities at December 31, 2004.

On March 3, 2002, a judgment was entered against the Company in favor of
Fidelity Leasing in the amount of $29,854 in damages, fees and costs, and it
is subject to interest.  As of the date of this filing the Company has no
evidence to show that this lien has been released.  This amount is included in
accrued liabilities at December 31, 2004.



                               F-20

<PAGE> 43


          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
          Notes to the Consolidated Financial Statements
                    December 31, 2004 and 2003


NOTE 7 - COMMITMENTS AND CONTINGENCIES (Continued)

Employment Agreement
--------------------

On February 1, 2003, the Company entered into a new employment agreement with
its president, Mr. Gary Kimmons. The agreement provides for a three-year term
that automatically renews at the end of the term for consecutive one-year
terms, and which provides for an annual base compensation of $240,000 and
non-qualified stock options to 3,000,000 shares of Common Stock under the
Company's 2003 Stock Option Plan, at a purchase price of 110% of the closing
market price on the date of grant. Options to purchase 1,000,000 shares are
exercisable immediately, options to purchase 1,000,000 shares vest and shall
be exercisable at such time as the Company is current and filed its annual and
quarterly reports for the years 2000, 2001 and 2002 and any reports then due
for the fiscal year 2003, and options to purchase 1,000,000 shares vest and
shall be exercisable at such time as the Company has raised a minimum of
$500,000 in investment capital.  Upon Mr. Kimmon's death or disability all
unvested warrants will become immediately vested and exercisable.   The
Company may terminate the agreement for cause, or upon the extended disability
or death of Mr. Kimmons. Mr. Kimmons may terminate the agreement for good
reason, which is defined as (1) diminution of duties, (2) failure by the
Company to comply with the agreement, (3) a requirement by the Company for Mr.
Kimmons to move locations, (4) any purported termination other than as
permitted in the agreement, (5) a change of control, or (6) failure to have a
successor corporation assume the agreement. If the agreement is terminated in
connection with a change of control, (1) the Company must pay Mr. Kimmons an
amount equal to approximately three times the sum of his annual base salary
and the average of the last annual incentive bonuses actually paid, (2) all
outstanding warrants immediately vest, (3) welfare and fringe benefits are
provided for one year, (4) the Company must pay the sum of any earned salary
not yet paid, deferred compensation and an amount equal to 150% of the value
of Mr. Kimmons accrued benefits in any Company long term incentive plan times
a fraction equal to the months worked in the performance period before
termination divided by the total performance period.

If the agreement is terminated for cause or Mr. Kimmons terminates for other
than good reason, the Company shall pay earned but unpaid salary and any
vested benefits payable to him under a plan or policy. In the event of a
change of control, Mr. Kimmons will remain with the Company until the later
of: (1) 15 days after the one year anniversary of the change of control, (2)
15 days after the anniversary date of any merger, or (3) January 31, 2006. The
agreement defines a change of control as: (1) any person acquiring 30% of the
Company or if Mr. Kimmons' voting rights are reduced to less than 30% of the
outstanding shares, (2) if during a two year period, individuals who were on
the board of directors (and any new directors elected by two-thirds of
directors in office at the beginning of the period or whose election or
nomination was so approved) cease to be a majority of the board of directors,
(3) if the shareholders approve a merger or consolidation (other than a merger
in which company shareholders own at least 50% of surviving entity), or (4) a
complete liquidation.



                               F-21

<PAGE> 44


          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
          Notes to the Consolidated Financial Statements
                    December 31, 2004 and 2003


NOTE 7 - COMMITMENTS AND CONTINGENCIES (Continued)

Consulting Agreements
---------------------

On November 5, 2003, the Company entered into a Consulting Services Agreement
with an unrelated organization.  Under the Agreement, the organization shall
provide advice and counsel regarding the Company's strategic business plans,
strategy and negotiations with potential business strategic partnering,
corporate planning and or other general business consulting needs as expressed
by the Company.  In addition to certain ongoing transaction fees which may be
paid pursuant to the terms of the Agreement, the organization has received an
initial signing and non-refundable fee of 900,000 shares of the common stock
of the Company, which were issued on November 17, 2003 and December 10, 2003,
and were valued collectively at $96,000.

On July 15, 2004, the Company entered into a Consulting Agreement with Sunil
Nariani, whereby Mr. Nariani will perform various consulting and
administrative services for the Company's Stellar subsidiary, in exchange for
a fee of 3,529,412 shares of common stock, payable in installments of 294,117
shares per month.  The term of this Agreement is one year, which will
automatically renew unless prior written notice is given.  Mr. Nariani was the
sole owner and executive officer of Stellar at the time the Company acquired
Stellar.

NOTE 8 - STOCK OPTIONS AND WARRANTS

During 1998, the Company established the "1998 stock option plan (the plan) to
promote the interest of the Company and its shareholders by attracting and
retaining exceptional employees and directors.  Any employee, of the Company
is eligible to be designated a participant.  The Board of the Company has sole
and complete authority to determine the employees to whom options shall be
granted, the number of each grant and any additional conditions and
limitations. The exercise price shall not be less than the fair market value
of the underlying shares.

In addition, the Company periodically issues warrants to purchase common stock
as an incentive, as compensation for services or settlement of debt to
officers, directors, employees, and consultants.

A summary of the status of the Company's outstanding incentive and
compensation stock options warrants as of December 31, 2004 and 2003 and
changes during the years ended December 31, 2004 and 2003 is presented below:

                                    2004                      2003
                           ------------------------ --------------------------
                                         Weighted                  Weighted
                                          Average                   Average
                                         Exercise                  Exercise
                              Shares       Price        Shares       Price
                           ------------ ------------ ------------ ------------
 Outstanding, beginning of
  year                       4,500,050  $      0.34      826,559  $      0.34
 Granted                    23,611,109         0.28    4,400,000         0.20
 Expired/Cancelled            (500,000)        0.34     (726,509)        0.34
 Exercised                 (23,611,109)           -            -            -
                          ------------- ------------ ------------ ------------

 Outstanding end of year     4,000,050  $      0.34    4,500,050  $      0.20
                          ============= ============ ============ ============

 Exercisable                 4,000,050  $      0.34    3,500,050  $      0.21
                          ============= ============ ============ ============


                               F-22

<PAGE> 45


          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
          Notes to the Consolidated Financial Statements
                    December 31, 2004 and 2003


NOTE 8 - STOCK OPTIONS AND WARRANTS (Continued)

                               Outstanding                  Exercisable
                     --------------------------------  -----------------------
                                 Weighted
                     Number      Average     Weighted  Number       Weighted
                     Outstanding Remaining   Average   Exercisable  Average
Range of             at Dec 31,  Contractual Exercise  at Dec 31,   Exercise
Exercise Prices      2004        Life        Price     2004         Price
-------------------- ----------- ----------- --------- ------------ ----------
 $ 0.08                 300,000     7.00     $   0.08     300,000   $  0.08
 $ 0.18               3,500,000     7.94     $   0.18   2,500,000   $  0.18
 $ 0.35                 600,000     6.00     $   0.35     600,000   $  0.35
 $ 0.50                 100,000     4.80     $   0.50     100,000   $  0.50
 $ 25.00                     50     4.65     $  25.00          50   $ 25.00
                     ----------- ----------- --------- ------------ ----------

                      4,000,050     7.55     $   0.20   3,500,050   $  0.21
                     =========== =========== ========= ============ ==========


On October 18, 2002, the Company issued a Private Placement Memorandum (PPM)
to accredited investors as defined in Rule 501 of Regulation 1 of the
Securities Act of 1933.  This PPM was for 40 units with each unit consisting
of 100,000 shares of common stock and a warrant to purchase up to 200,000
shares of common stock.  Each warrant vests immediately and will be
exercisable for a period of two years from the date of issuance.  Each unit is
being offered for $25,000 or $0.25 per share.  Each warrant is exercisable at
$0.35 per share.

NOTE 9 - GAIN ON RELEASE AND EXTINGUISHMENT OF DEBT

During 2003, the Company converted an accounts payable amount of $91,728 to
equity.  On the date of conversion the stock had a market value of $5,940,
therefore $85,788 was recorded as a gain on extinguishment of debt for the
year ended December 31, 2003.

During 2003, the Company converted a second accounts payable amount of $25,000
to equity.  On the date of conversion the stock had a market value of $50,000,
therefore $25,000 was recognized as a loss on the extinguishment of debt for
the year ended December 31, 2003.

During the year ended December 31, 2003, the Company had certain accounts
payable and accrued liabilities that originated prior to the Company ceasing
its operations in June of 1999 that had been outstanding for periods exceeding
the statute of limitations of four years and were determined to have been
extinguishable and were written off as of December 31, 2003, totaling
$2,220,782.  None of these liabilities were due to related parties.

The Company has certain accounts payable, notes payable, accrued liabilities,
and accrued interest, which had been outstanding for some time.  According to
the Company's legal counsel, The Texas Code V.T.C.A., Civil Practice and
Remedies Code Section 16.004 (a), states that an action upon any contract
obligation or liability founded upon an instrument in writing must be brought
within four years of such a written agreement. As of December 31, 2004, no
such actions to enforce payment of the obligations have been filed.
Accordingly, a total of $3,187,363 has been written-off and a gain on release
of debt recognized of which $966,581 has been recorded in the year ended
December 31, 2004.

                               F-23

<PAGE> 46


          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
          Notes to the Consolidated Financial Statements
                    December 31, 2004 and 2003


NOTE 9 - GAIN ON RELEASE AND EXTINGUISHMENT OF DEBT (Continued)

Additionally, during the 2004 fiscal year the Company recorded a loss on
extinguishment of debt of $26,298 relating to certain accounts payable that
were satisfied through the issuance of common stock.

NOTE 10 - ACQUISITIONS

Stellar Software Network, Inc.
-----------------------------

On June 16, 2004, the Company entered into a Purchase Agreement (the "Purchase
Agreement"), pursuant to which the Company agreed to purchase all of the
issued and outstanding shares of common stock of Stellar Software Network,
Inc., a Texas corporation ("Stellar").  The Purchase Agreement was amended on
June 18, 2004 ("amended acquisition date").  According to the terms of the
Agreement, the Company acquired all of the issued and outstanding shares of
common stock of Stellar, in exchange for $191,000, paid in the form of the
8,025,211 shares of the Company's common stock.  The consolidated statements
of operations include the operations of Stellar from the amended acquisition
date through December 31, 2004.

Stellar is engaged in the business of providing professional staffing services
for entities in the custom software development and information technology
industries.  On the date of acquisition, Stellar's only assets were in the
form of cash, accounts receivable, and minimal fixed assets.  The Company
deemed the primary value of Stellar to be its customer contacts and
relationships, management experience and expertise, and network of
professional and technical contacts.  Pursuant to SFAS No. 141, management has
not assigned a value to these items, as they were deemed purely qualitative in
nature.  These factors contributed to the Company agreeing to acquire Stellar
for a purchase price exceeding the value of Stellar's net assets.
Accordingly, the Company recorded goodwill of $136,839 upon the acquisition of
Stellar.  The Company has not applied this goodwill to any specific intangible
assets, and does not believe this goodwill will be deductible for income tax
purposes.

                               F-24
<PAGE> 47



          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
          Notes to the Consolidated Financial Statements
                    December 31, 2004 and 2003


NOTE 10 - ACQUISITIONS (Continued)

Stellar Software Network (Continued)
-----------------------------------

The following is an unaudited condensed balance sheet showing the fair values
of the assets and liabilities of Stellar at the date of acquisition:

                              ASSETS
                                                               Stellar
                                                               Software
                                                               Network
                                                               -----------
            Cash                                               $   28,403
            Accounts receivable                                    80,989
            Fixed assets, net                                      12,013
                                                               -----------

            Total Assets Acquired                              $  121,405
                                                               ===========

                           LIABILITIES

            Accounts payable                                       65,323
            Notes payable - related party                           1,921
                                                               -----------

            Total Liabilities Assumed                          $   67,244
                                                               ===========

            NET ASSETS ACQUIRED                                $   54,161
                                                               ===========

Ascendant TSG, Inc.
-------------------

On August 13, 2004, the Company entered into a Corporate Restructuring
Agreement ("the Agreement") in which the Company acquired all the issued and
outstanding common stock of Ascendant TSG, Inc. ("TSG").  According to the
terms of the Agreement, the Company acquired all of the TSG's issued and
outstanding common stock in exchange for $1,500,000, in the form of the
Company's common stock (42,857,153 shares).  The consolidated statements of
operations include the operations of TSG from acquisition through December 31,
2004.

TSG is a full-service provider of collaborative e-business process software,
process consulting, web development and hosting services.  At the time TSG was
acquired by the Company, TSG's only assets were in the form of cash and
accounts receivable.  The Company deemed the primary value of TSG to be its
consistent stream of revenues low overhead, and customer relationships.
Despite TSG's relatively minimal assets, the Company deemed it expedient to
pay $1,500,000 in order to secure this revenue stream and customer base.  The
acquisition of TSG resulted in the Company recording goodwill of $1,584,865.
This goodwill was written-off in full on December 31, 2004, as discussed
further in Note 11.

                               F-25

<PAGE> 48


          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
          Notes to the Consolidated Financial Statements
                    December 31, 2004 and 2003


NOTE 10 - ACQUISITIONS (Continued)

Ascendant TSG, Inc. (Continued)
-------------------------------

The following is an unaudited condensed statement of operations for the year
ended December 31, 2004 showing the combined results of operations of TSG,
Stellar and GK as though GK had acquired TSG and Stellar effective January 1,
2004.

<TABLE>
<CAPTION>

                              Ascendant    Stellar      GK                        Pro Forma    Pro Forma
                                 TSG       Software     Intelligent   Combined    Adjustments  Combined
                             ------------- ------------ ------------ ------------ ------------ ------------
<S>                                        <C>          <C>          <C>          <C>          <C>
REVENUES                     $    765,925  $ 1,084,541  $         -  $ 1,850,466  $         -  $ 1,850,466

COST OF SALES                     273,437      814,340            -    1,087,777            -    1,087,777
                             ------------- ------------ ------------ ------------ ------------ ------------
GROSS PROFIT                      492,488      270,201            -      762,289            -      762,289

OPERATING EXPENSES                 55,384      250,735    5,556,871    5,862,990            -    5,862,990

OTHER INCOME (EXPENSES)            (3,230)        (573)     862,096      858,293            -      858,293
                             ------------- ------------ ------------ ------------ ------------ ------------

NET INCOME (LOSS)            $    433,874  $    18,893  $(4,694,775) $(4,242,008) $         -  $(4,242,008)
                             ============= ============ ============ ============ ============ ============
PRO FORMA BASIC AND DILUTED
(LOSS) PER SHARE                                        $     (0.04)                           $     (0.05)
                                                        ============                           ============

The following is an unaudited condensed statement of operations for the year ended December 31, 2003
showing the combined results of operations of Stellar and GK as though GK had acquired TSG and Stellar
effective January 1, 2003.

</TABLE>
<PAGE> 49
<TABLE>
<CAPTION>


                              Ascendant    Stellar      GK                        Pro Forma    Pro Forma
                                 TSG       Software     Intelligent   Combined    Adjustments  Combined
                             ------------- ------------ ------------ ------------ ------------ ------------
<S>                                        <C>          <C>          <C>          <C>          <C>
REVENUES                     $  1,542,812  $   821,283  $         -  $ 2,364,095  $         -  $ 2,364,095

COST OF SALES                     672,633      615,962            -    1,288,595            -    1,288,595
                             ------------- ------------ ------------ ------------ ------------ ------------

GROSS PROFIT                      870,179      205,321            -    1,075,500            -    1,075,500

OPERATING EXPENSES                491,145      198,042    1,282,364    1,971,551            -    1,971,551

OTHER INCOME (EXPENSES)           (14,102)      (1,421)   2,107,538    2,092,015            -    2,092,015
                             ------------- ------------ ------------ ------------ ------------ ------------

NET INCOME                   $    364,932  $     5,858  $   825,174  $ 1,195,964  $         -  $ 1,195,964
                             ============= ============ ============ ============ ============ ============
PRO FORMA BASIC AND DILUTED
INCOME PER SHARE                                        $      0.03                            $     (0.04)
                                                        ============                           ============



                                       F-26

</TABLE>
<PAGE> 50


          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
          Notes to the Consolidated Financial Statements
                    December 31, 2004 and 2003


NOTE 10 - ACQUISITIONS (Continued)

Ascendant TSG, Inc. (Continued)
-------------------------------

The following is an unaudited condensed balance sheet showing the fair values
of the assets and liabilities of Ascendant TSG at the date of acquisition:

                            ASSETS
                                                      Ascendant
                                                        TSG
                                                    -------------
      Cash                                          $     76,682
      Accounts receivable                                 57,000
                                                    -------------

      Total Assets Acquired                         $    133,682
                                                    =============

                           LIABILITIES

      Accounts payable                              $      1,532
      Accrued expenses                                       317
      Notes payable                                       26,512
      Notes payable - related party                      190,186
                                                    -------------

      Total Liabilities Assumed                     $    218,547
                                                    =============

      NET LIABILITIES ASSUMED                       $    (56,821)
                                                    =============


NOTE 11 - IMPAIRMENT OF GOODWILL

As discussed in Note 10, the Company acquired Ascendant TSG, Inc. ("TSG") in
August 2004 for a cost of $1,500,000, which was paid in the form of 42,857,152
shares of the Company's common stock.  This acquisition was deemed by
management to be beneficial to the Company due to the fact that TSG had an
established customer base and a consistent stream of revenues.  At the time
the acquisition was consummated, the Company recorded $1,584,865 in goodwill
related to the acquisition.

Subsequent to the acquisition of TSG, the Company learned that TSG's most
significant customer had discontinued its relationship with TSG.  This
customer was the source of approximately 98% of TSG's total revenues for the
year ended December 31, 2004, and approximately 90% of total revenues in the
2003 fiscal year.  Taking this discontinued relationship into account,
management has concluded that TSG has no significant reliable source of future
revenues, and the likelihood of TSG being profitable is minimal.  Based on
this analysis, management elected to fully impair the goodwill associated with
the acquisition of TSG as of December 31, 2004.  The Company has recorded an
impairment of goodwill totaling $1,584,865 for the year ended December 31,
2004.

                               F-27

<PAGE> 51


          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
          Notes to the Consolidated Financial Statements
                    December 31, 2004 and 2003


NOTE 12 - COMMON STOCK ACTIVITY

During the year ended December 31, 2004, approximately 63% of the Company's
common stock issuances were as consideration for services rendered.  The
following table summarizes the Company's issuances of common stock for
services during the period:

   Date of        Total Shares  Price per      Nature of      Related
   Issuance          Issued      Share         Services        Party
   --------       ------------  ---------  -----------------  --------

    3/5/04            500,000    $0.046       Consulting         No
   3/25/04         12,195,122    $0.037       Administrative     Yes
   4/22/04          1,272,726    $0.050       Administrative     Yes
   4/23/04          3,400,000    $0.050       Consulting         No
   5/25/04            133,333    $0.050       Consulting         No
   6/26/04            268,870    $0.040       Administrative     Yes
   7/28/04          1,155,462    $0.030       Consulting         No
   8/20/04            294,117    $0.040       Consulting         No
   8/23/04          4,285,714    $0.040       Consulting         No
    9/3/04            294,117    $0.040       Consulting         No
   9/26/04          1,000,000    $0.040       Consulting         No
   10/6/04            294,117    $0.040       Consulting         No
  11/18/04            294,117    $0.030       Consulting         No
   12/2/04            500,000    $0.030       Consulting         No
   12/6/04            294,117    $0.020       Consulting         No
  12/17/04          2,000,000    $0.020       Consulting         No
  12/27/04         50,000,000    $0.020       Consulting         No
                  -----------
                   76,181,812    Total Common Shares Issued for Services
                  ===========

During the year ended December 31, 2004, the Company issued a total of
76,181,812 common shares as consideration for services rendered.  The
aggregate value of these shares was $1,926,917, based on the respective
closing market prices of the stock on the dates of authorization.


NOTE 13 - SUBSEQUENT EVENTS

Acquisition of Corazong Music Management
----------------------------------------

On January 17, 2005, the Company entered into a Purchase Agreement with two
unrelated individuals, whereby the Company acquired all of the issued and
outstanding common stock of Corazong Music Management B.V., a Dutch
corporation ("Corazong"), in exchange for $1,260,000, payable in Series B
Convertible Preferred Stock.  The Company also agreed to provide Corazong with
a $1,500,000 line of credit to be used to develop and market its catalog and
to develop new talent and artists. The transaction closed on February 11,
2005.  As an additional stipulation of the Agreement with Corazong, the
sellers have retained the right to repurchase 49% of Corazong for a period of
up to two years.


                               F-28

<PAGE> 52


          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
          Notes to the Consolidated Financial Statements
                    December 31, 2004 and 2003


NOTE 13 - SUBSEQUENT EVENTS (Continued)

Acquisition of Corazong Music Management (Continued)
----------------------------------------------------

Corazong, formerly a privately-held European company, is a music recording and
production entity that released its first music CD in 1999 and is currently
attempting to expand its operations into Western Europe and the United States.
The most significant asset currently managed by Corazong is its music catalog,
which appraised at $1,991,101.

Acquisition of R.S. Entertainment
---------------------------------

On March 2, 2005, the Company agreed to purchase all of the outstanding common
stock of R.S. Entertainment, Inc., a Utah Corporation, ("RSE") for $1,000,000
in shares of the Company's unregistered common stock.   The Company also
agreed to provide RSE with a $2,500,000 line of credit to be used for print
and advertising funds for the films it distributes. By providing the print and
advertising money for the films it distributes, RSE expects to retain a
substantial percentage of the box office and residual revenues from the films.
The Line of Credit is expected to be available to RSE upon the Company's
successful completion of its proposed financing. In the event that the line of
credit is not available as of May 31, 2005, an additional 1,000,000 shares of
the Company's common stock will be issued each month until the line of credit
becomes available.

The Sellers have the right to rescind this Agreement if line of credit is not
available after 120 days of the closing date.   Should this Agreement be
rescinded, the Sellers will return the Company's shares received as part of
the purchase price for the RSE stock.  Sellers shall retain any shares issued
in connection with their employment with RSE (subsequent to March 2, 2005) as
liquidated damages.

Specializing in the independent motion picture industry, RSE provides
theatrical film distribution services and strategic market development.  RSE
works with third parties in creative advertising, media placement and public
relations to achieve maximum box office return for their clients.  RSE also
offers complete distribution services for clients   whether the release is
limited, regional or nationwide.

 The founders of R.S. are Ron Rodgers and Randy Slaughter.  Each has over 35
years of theatrical distribution and marketing experience.  Both Mr. Rodgers
and Mr. Slaughter will retain their executive positions with RSE subsequent to
its acquisition by the Company.


                               F-29

<PAGE> 53

          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
          Notes to the Consolidated Financial Statements
                    December 31, 2004 and 2003


NOTE 13 - SUBSEQUENT EVENTS (Continued)

Acquisition of White Canyon and Channel Access
-----------------------------------------------

On April 7, 2005, the Company entered into a Purchase Agreement with two
unrelated individuals, whereby it acquired 100% of the issued and outstanding
common stock of White Canyon, Inc. ("White Canyon") and Channel Access, Inc.
("Channel Access").  According to the terms of the Agreement, the Company
issued to the individuals an aggregate of 1,000,000 shares of restricted
Series C convertible preferred stock, each share of which may be converted
into 800 shares of restricted common stock, or redeemed by the Company at
$4.00 per share.  Additionally, upon the Company's completion of a
stock-split, the Company will issue to the individuals an additional
20,000,000 (pre-split) shares of its common stock as further consideration for
the acquisitions.  Both White Canyon and Channel Access are entities
specializing in the sale and distribution of proprietary computer software
programs.

Upon the Company's completion of a listing on the American Stock Exchange or
on September 30, 2005, whichever is earlier, the Company will redeem any
unconverted shares of preferred stock at $4.00 per share. The Company
anticipates that, following the Closing Date, White Canyon and Channel Access
will operate as subsidiaries ("Subsidiaries") of the Company. Also, the
Sellers have the right to rescind this Agreement if any unconverted preferred
shares are not redeemed by September 30, 2005.   Should this Agreement be
rescinded, the Sellers will return the Company's shares received as part of
the purchase price for the White Canyon and Channel Access stock.  The Sellers
shall retain the 20,000,000 (pre split) common shares issued in connection
with the Agreement as full liquidated damages.

White Canyon, Inc. is a provider of security software aimed at protecting
individuals and businesses from personal identity theft and trade secret
theft. White Canyon's markets and sells a hard drive sanitizing software
product called WipeDrive, and an individual file scanning and deletion utility
program called SecureClean.

Channel Access specializes in marketing and distributing utility and personal
productivity software products to retail stores in the United Sates and
Canada.  Channel Access also distributes utility software for GetData, an
Australian software manufacturer.

Other Subsequent Events
------------------------

In January and February 2005, the Company issued 294,117 shares of common
stock to Sunil Nariani pursuant to the terms of the one-year Consulting
Agreement consummated in June, 2004.

                               F-30

<PAGE> 54

          GK INTELLIGENT SYSTEMS, INC. AND SUBSIDIARIES
          Notes to the Consolidated Financial Statements
                    December 31, 2004 and 2003



NOTE 13 - SUBSEQUENT EVENTS (Continued)

Other Subsequent Events (Continued)
-----------------------------------

On February 7, 2005, the Board of Directors approved a Certificate of
Designation for Series B Convertible Preferred Stock.  The Series B
Convertible Preferred Stock can convert into common stock after May 1, 2005 at
the rate of one share of Series B Stock for six hundred and thirty shares of
common stock, subject to adjustment.  Each share of Series B Stock has six
hundred and thirty votes, subject to adjustment, and votes together with the
common stock.

In February 2005, the Company issued and aggregate of 3,000,000 shares of
common stock to two unrelated parties as consideration for consulting services
to be rendered.

On February 18, 2005 the Company issued 4,500,000 shares of common stock to
the Company's president, Gary Kimmons, as payment in full on wages payable of
$63,000.



                               F-31


<PAGE> 55


Item 8.   Changes In and Disagreements With Accountants on Accounting and
          Financial Disclosure.

                None.

Item 8A.  Controls and Procedures.

     (a)  Evaluation of Disclosure Controls and Procedures.

Our Chief Executive Officer, Gary F. Kimmons, and Chief Financial Officer,
Gary F. Kimmons, have reviewed our disclosure controls and procedures as of
the end of the period covered by this report.  Based upon this review, Mr.
Kimmons believes that our disclosure controls and procedures are effective in
ensuring that material information related to the Company is made known to him
by others within the Company.

     (b)  Changes in Internal Controls Over Financial Reporting.

There have been no significant changes in internal controls over financial
reporting that occurred during the fiscal period covered by this report that
have materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.

Item 8B.  Other Information.

      None.

                             PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons
          Compliance With Section 16(a) of the Exchange Act.


Identity of Directors and Executive Officers.
---------------------------------------------

     Name                Age   Position
     ------------------------------------------------------------------
     Gary F. Kimmons     54    Chairman of the Board, President
                               and Chief Executive Officer and Chief
                               Financial Officer
     Dick Meador         55    Director
     Kathryn Kimmons     51    Director and Secretary

     GARY F. KIMMONS, Age 54, has served as chairman of the board since August
1998, and from 1993 until April 1998. Mr. Kimmons has also served as president
and chief executive officer since 1993 and secretary since September 1998. Mr.
Kimmons has extensive experience in the design, development and implementation
of business management and technical training systems. Mr. Kimmons received a
bachelor of science degree in psychology, anthropology, and behavioral science
from Rice University in 1973 and a masters degree in applied industrial
psychology and management science from Stevens Institute of Technology in
1975.


<PAGE> 56


     DICK MEADOR, age 55, currently serves as Area Manager for Barrand, Inc.,
a large regional service provider in the food and beverage industry.  Mr.
Meador has been employed in the food and beverage industry for 16 years,
during which time he has distinguished himself as a top performer.  Mr. Meador
brings to the Board significant expertise in the management of corporate
operations. Prior to his tenure with Whataburger, Inc., Meador worked with
several other large food service providers in a similar capacity.

     KATHRYN KIMMONS, age 51, currently serves as the Secretary and a
Director.  Mrs. Kimmons has over 20 years of experience in the entertainment
industry as well as 10 years in retail sales and operations.  A business
entrepreneur who has founded her own successful entertainment business as well
as a retail business selling antiques and collectibles, Mrs. Kimmons is
uniquely talented in small business management, merchandising presentation,
creative retail project implementation, interior design and display, retail
buying, and effective sales and marketing.

Family Relationships.
--------------------

     Gary Kimmons and Kathryn Kimmons are husband and wife.


Section 16(a) Beneficial Ownership Compliance.
---------------------------------------------

     Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and persons who own more than ten
percent of the Company's Common Stock, to file initial reports of beneficial
ownership on Form 3, changes in beneficial ownership on Form 4 and an annual
statement of beneficial ownership on Form 5, with the SEC.  Such executive
officers, directors and greater than ten percent shareholders are required by
SEC rules to furnish the Company with copies of all such forms that they have
filed.

     Based solely on its review of the copies of such forms filed with the SEC
electronically, received by the Company and representations from certain
reporting persons, the Company believes that for the fiscal year ended
December 31, 2004, all the officers, directors and more than 10% beneficial
owners complied with the above described filing requirements.


Item 10.    Executive Compensation.

     The following table sets forth the aggregate compensation paid for
services rendered during the periods indicated:


<PAGE> 57
<TABLE>
<CAPTION>

                          SUMMARY COMPENSATION TABLE
                          ---------------------------
                                                        Long Term Compensation
                                                      --------------------------
                               Annual Compensation       Awards          Payouts
                          --------------------------- ----------------- --------
                                                                 Secur-         All
                                            Other                ities    ($)   Other
Name and         Year or                    Annual    Restricted Under-   LTIP  Compen-
Principal        Period   Salary     Bonus  Compen-   Stock      lying    Pay-  sation
Position         Ended    ($)        ($)    sation($) Awards     Options  outs  ($)
(a)              (b)      (c)        (d)    (e)       (f)        (g)(#)   (h)   (I)
---------------  -------  ---------- -----  --------- ---------- -------  ----  --------

              <c>      <c>        <c>    <c>       <c>        <c>      <c>   <c>
Gary F.
Kimmons (1)(2)   2004     $ 240,000     0   $      0        0        0     0     0
President, CEO   2003     $ 240,000     0   $      0        0        0     0     0
and Director     2002     $ 240,000     0   $      0        0        0     0     0

____________________


      (1)   Mr. Kimmons, the President and CEO of the Company is currently subject to an
      Employment Agreement with the Company.  See "Employment Contracts" below.

      (2)  For 2003, Mr. Kimmon's base salary was $240,000. In 2004, Mr. Kimmons was paid
      through the issuance of 12,195,122 shares of common stock in March, 2004, which
      issuance paid overdue accrued compensation for 2003, as well as some 2004 compensation.
      For 2003, Mr. Kimmon's base salary was $240,000. $118,760 of which was paid in cash,
      $20,000 of which was paid through  the issuance of warrants to acquire 80,000 shares of
      common stock exercisable at $0.35 per share until December 31, 2007, and $101,239 of
      which was paid on March 25, 2004 in the form of 8,230,861 shares of restricted common
      stock issued to Mr. Kimmons at a price of $0.0123 per share.  In 2002, Mr. Kimmons
      received a base salary of $240,000, $130,000 of which was paid through the issuance of
      1,300,000 post-reverse split adjusted restricted shares of common stock and $110,000 of
      which was paid in 2003 in the form of a warrant entitling Mr. Kimmons to purchase
      520,000 shares of common stock at a price of $0.35 per share.

</TABLE>

Employment Contract
-------------------

      On February 1, 2003, the Company entered into a new employment agreement
with Mr. Kimmons. The agreement provides for a three-year term that
automatically renews at the end of the term for consecutive one-year terms,
and which provides for an annual base compensation of $240,000 and
non-qualified stock options to 3,000,000 shares of Common Stock under the
Company's 2003 Stock Option Plan, at a purchase price of $0.18 per share (110%
of the closing market price on the date of grant). Options to purchase
1,000,000 shares are exercisable immediately, options to purchase 1,000,000


<PAGE> 58


shares vest and shall be exercisable at such time as the Company is current
and filed its annual and quarterly reports for the years 2000, 2001 and 2002
and any reports then due for the fiscal year 2003, and options to purchase
1,000,000 shares vest and shall be exercisable at such time as the Company has
raised a minimum of $500,000 in investment capital.  Upon Mr. Kimmon's death
or disability all unvested warrants will become immediately vested and
exercisable.  The Company may terminate the agreement for cause, or upon the
extended disability or death of Mr. Kimmons. Mr. Kimmons may terminate the
agreement for good reason, which is defined as (1) diminution of duties, (2)
failure by the Company to comply with the agreement, (3) a requirement by the
Company for Mr. Kimmons to move locations, (4) any purported termination other
than as permitted in the agreement, (5) a change of control, or (6) failure to
have a successor corporation assume the agreement. If the agreement is
terminated in connection with a change of control, (1) the Company must pay
Mr. Kimmons an amount equal to approximately three times the sum of his annual
base salary and the average of the last annual incentive bonuses actually
paid, (2) all outstanding warrants immediately vest, (3) welfare and fringe
benefits are provided for one year, (4) the Company must pay the sum of any
earned salary not yet paid, deferred compensation and an amount equal to 150%
of the value of Mr. Kimmons accrued benefits in any Company long term
incentive plan times a fraction equal to the months worked in the performance
period before termination divided by the total performance period. If the
agreement is terminated for cause or Mr. Kimmons terminates for other than
good reason, the Company shall pay earned but unpaid salary and any vested
benefits payable to him under a plan or policy. In the event of a change of
control, Mr. Kimmons will remain with the Company until the later of: (1) 15
days after the one year anniversary of the change of control, (2) 15 days
after the anniversary date of any merger, or (3) January 31, 2006. The
agreement defines a change of control as: (1) any person acquiring 30% of the
Company or if Mr. Kimmons' voting rights are reduced to less than 30% of the
outstanding shares, (2) if during a two year period, individuals who were on
the board of directors (and any new directors elected by two-thirds of
directors in office at the beginning of the period or whose election or
nomination was so approved) cease to be a majority of the board of directors,
(3) if the shareholders approve a merger or consolidation (other than a merger
in which company shareholders own at least 50% of surviving entity), or (4) a
complete liquidation.

Director Compensation
---------------------

     On December 31, 2004, we entered into a Director's Agreement to retain
the services of Dick Meador as a member of the Board of Directors. Under the
Agreement Mr. Meador will serve as a Director from January 1, 2005 through
December 31, 2005 and will receive compensation of 300,000 restricted shares
of common stock or          warrant to purchase 300,000 restricted shares of
common shares.  As a result of this Agreement, Mr. Meador received a warrant
on December 31, 2005 to purchase up to 300,000 shares of unregistered common
stock exercisable at $0.08 per share until December 31, 2011.


<PAGE> 59


Stock Options and Warrants
--------------------------

     During 1996 the Company adopted, and the board of directors approved, the
1995 Incentive Stock Option Plan ("1995 Plan").  Pursuant to the 1995 Plan,
options to purchase shares of Common Stock may be granted to employees,
officers, and directors of the Company.  In June 1998, the board of directors
approved an increase in the number of authorized options from 100,000 (post
reverse-split adjusted) shares to 500,000 (post reverse-split adjusted)
shares.  Options granted under the 1995 Plan generally expire five to ten
years after the date of grant.

     On February 1, 2003, the Board of Directors approved and adopted the GK
Intelligent Systems, Inc, 2003 Stock Option Plan ("2003 Plan"). The 2003 Plan
was established in order to provide a method whereby chosen key employees and
persons providing services to the Company who are primarily responsible for
the management and growth of the Company and who are expected to continue to
make substantial contributions to the Company's future can be offered
incentives. The number of common shares authorized under the 2003 Plan is ten
million (10,000,000) and said shares will be granted either as Incentive Stock
Options as defined in Section 422 of the Internal Revenue Code or
Non-Qualified Stock Options for those options which do not meet the conditions
of Section 422 of the Internal Revenue Code.

     On March 31, 2004 the Board of Directors approved and adopted the GK
Intelligent Systems, Inc. 2004 Stock Option Plan ("2004 Plan") which became
effective April 5, 2004.  The 2004 Plan was established in order to provide a
method to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to employees and
consultants and to promote the success of the Company's business through the
issuance of options, stock purchase rights, other stock-based awards, and
other benefits. Options granted under the 2004 Plan may be Incentive Stock
Options as defined in Section 422 of the Internal Revenue Code or
Non-Qualified Stock Options. The number of common shares authorized under the
2004 Plan is thirty million (30,000,000).

     As of December 31, 2004, there were non-qualified stock options
outstanding to purchase 4,000,050 shares of common stock, of  which 3,000,050
were exercisable.  For the fiscal year ended December 31, 2004, the Company
did not maintain any long-term retirement or other benefit plan, except as
described in this report.

Non-Employee-Directors and Consultants Retainer Stock Plan
----------------------------------------------------------

     On April 1, 2003 the Board of Directors approved and adopted the Non
Employee-Directors and Consultants Retainer Stock Plan for the Year 2003. The
plan was established in order to provide a method whereby chosen directors and
persons providing services to the Company may be offered incentives in
addition to those presently available, and may be stimulated by increased
personal involvement in the fortunes and success of the Company, thereby
advancing the interests of the Company and its shareholders. The number of
common shares authorized under the plan is two million (2,000,000).

Option Grants Table
-------------------

     The following tables reflect certain information, with respect to stock
options granted under the Company's stock option plans to certain executive
officers and directors during fiscal 2004.


<PAGE> 60


              OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

                    Number Of    % Of Total
                    Securities   Options
                    Underlying   Granted To   Exercise
                    Options      Employees    Or Base
                    Granted      In Fiscal    Price            Expiration
Name                (#)          Year(%)      ($/Sh)(1)        Date
------------------- ------------ ------------ ---------------- --------------
Gary Kimmons                0         0%         0             (Note 1)
Kathryn Kimmons             0         0%         0                 0
Dick Meador           300,000       100%      $0.08            12/31/10
------------------- ------------ ------------ ---------------- -------------

     (1)    In 2003, Gary Kimmons received the following options and/or
     warrants: (a) a warrant to purchase up to 520,000 shares at the exercise
     price of $0.35 per share exercisable until December 31, 2007, which
     represented part of Mr. Kimmons' compensation for 2002; (b) a warrant to
     purchase up to 80,000 shares at the exercise price of $0.35 per share
     exercisable until December 31, 2007; and (c) an option to purchase up to
     3,000,000 shares at the exercise price of $0.18 per share which was
     granted to Mr. Kimmons in connection with his February 1, 2003 employment
     agreement, exercisable until February 1, 2013 (of which 2,000,000 shares
     are presently exercisable, and the balance shall become exercisable when
     the Company has raised a minimum of $500,000 in investment capital).

Option Exercise and Year End-Value Table
-----------------------------------------

     The following tables reflect certain information, with respect to the
exercise of stock options by certain executive officers during fiscal 2004, on
a post-reverse split adjusted basis:

<TABLE>
<CAPTION>

         AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR
                      AND YEAR-END OPTION/SAR VALUE

                                             Number Of
                                             Securities             Value Of
                                             Underlying             Unexercised
                                             Unexercised            In-The-Money
                                             Options/Warrants At    Options At
                                             Fy-End(#)              Fy-End($)(1)
                 Shares        Value     ------------------------------------------
                 Acquired On  Realized      Exercisable (E)/        Exercisable(E)/
Name             Exercise(#)    ($)        Unexercisable (U)      Unexercisable(U)*
---------------- ------------ -------- ------------------------- ------------------

              <c>          <c>      <c>                       <c>
Gary Kimmons(1)       0        0        2,600,000(E)/1,000,000(U)   0(E)/0(U)
Dick Meador           0        0          600,000(E)/0(U)           0(E)/0(U)
Kathryn Kimmons       0        0                0(E)/0(U)           0(E)/0(U)
____________________

</TABLE>
<PAGE> 61


* Computed based on the differences between the closing market price and
  aggregate exercise prices as of December 31, 2004.

(1)  Includes warrants to purchase 600,000 shares of Company Common
     Stock exercisable at $0.35 per share, which were fully vested as of
     December 31, 2003.  None of the warrants have been exercised, nor have
     any expired as of the date of this report.



Item 11.    Security Ownership of Certain Beneficial Owners and Management and
            Related Stockholder Matters

     (a)    Security Ownership of Certain Beneficial Owners

     The following table sets forth security ownership information as of the
close of business on April 6, 2005, for any person or group, known by the
Company to own more than five percent (5%) of the Company's voting securities.
The information set forth in this Item 11 has not been adjusted to reflect the
1:200 reverse stock split effected May 18, 2005.

                                          Number of
                                          Shares           Percent of
                                          Beneficially     Outstanding
Name of Beneficial Owner                  Owned(1)         Shares
-----------------------------------------------------------------------------
Gary F. Kimmons(2)(3).................... 23,148,720        10.2%
Kathryn Kimmons(4)....................... 23,148,720        10.2%
Julie Maranto (6) ....................... 42,857,143        19.0%
__________________

     1.   All amounts shown in this column include shares obtainable upon
          exercise of stock options or warrants currently exercisable or
          exercisable within 60 days of the date of this table.

     2.   Mr. Kimmons is a general partner of the Kimmons Family Partnership,
          Ltd., and as such has the sole voting, investment and disposition
          power over the 6,832,360 shares of Common Stock owned by the
          partnership.

     3.   Mr. Kimmons is deemed to own (a) 6,832,360 of these shares owned of
          record by the Kimmons Family Partnership, Ltd., by virtue of Mr.
          Kimmons being the General Partner of the Kimmons Family Partnership,
          Ltd., (b) 600,000 of these shares by virtue of warrants to purchase
          these shares, and (c) 3,000,000 of these shares by virtue of options
          to purchase these shares (options to purchase 2,000,000 of these
          shares have already vested, and the Company believes that options to
          purchase 1,000,000 of these shares shall vest during the next 60
          days).

     4.   Mrs. Kimmons is deemed to have indirect beneficial ownership of
          these shares, as the spouse of Gary F. Kimmons.

     The address of all persons listed above is 2602 Yorktown Place, Houston,
Texas 77056


<PAGE> 62


     (b)    Security Ownership of Management

     The following table sets forth security ownership information as of the
close of business on April 6, 2005, of all directors, executive officer listed
in the "Summary Compensation Table" set forth herein, and all directors and
executive officers as a group.


                                          Number of
                                          Shares           Percent of
                                          Beneficially     Outstanding
Name of Beneficial Owner                  Owned(1)         Shares
------------------------------------------------------------------------------
Gary F. Kimmons(2)(3)..................... 23,148,720        10.2%
Kathryn Kimmons(4)........................ 23,148,720        10.2%
Dick Meador(5)............................    952,000         0.3%
All directors and executive
 officers (3 Persons)..................... 24,100,720        10.5%
__________________

     1.   All amounts shown in this column include shares obtainable upon
          exercise of stock options or warrants currently exercisable or
          exercisable within 60 days of the date of this table.

     2.   Mr. Kimmons is a general partner of a the Kimmons Family
          Partnership, Ltd., and as such has the sole voting,  investment and
          disposition power over the 6,832,360  shares of Common Stock owned
          by the partnership.

     3.   Mr. Kimmons is deemed to own (a) 6,832,360 of these shares owned of
          record by the Kimmons Family Partnership, Ltd., by virtue of Mr.
          Kimmons being the General Partner of the Kimmons Family Partnership,
          Ltd., (b) 600,000 of these shares by virtue of warrants to purchase
          these shares, and (c) 3,000,000 of these shares by virtue of options
          to purchase these shares (options to purchase 2,000,000 of these
          shares have already vested, and the Company believes that options to
          purchase 1,000,000 of these shares shall vest during the next 60
          days).

     4.   Mrs. Kimmons is deemed to have indirect beneficial ownership of
          these shares, as the spouse of Gary F. Kimmons.

     5.   Mr. Meador is deemed to own 600,000 of these shares by virtue of a
          warrant to purchase these shares.

<PAGE> 63


     (c)    Changes in Control.

     To the best of the Company's knowledge there are no present arrangements
or pledges of the Company's securities, which may result in a change in
control of the Company.

     There are certain contractual provisions which may deter an outside party
from attempting to acquire control of the Company.  Such provisions include:

     1.     The Employment Agreement with Gary F. Kimmons.  For a summary
description of the Employment Agreement with Mr. Kimmons and its change in
control provisions, see Item 10 Executive Compensation in this report.

     2.     The Company's Non-Employee Directors and Consultants Retainer
Stock Plan for the year 2004 provides that in the event of a change in control
(as defined in the Plan) occurs, certain deferred stock accounts under the
plan will be immediately credited with the amount and kind of shares that the
holder would ordinarily have received at a later date, certain other
adjustments may be made to reflect the effectiveness of the transaction, and
the committee may adjust the plan.  No shares have been issued and no deferred
stock accounts have yet been credited under this Plan as of the date of this
report.

     3.     Both the Company's 2003 Stock Option Plan and 2004 Stock Option
Plan have "change in control" or "transfer of control" provisions, which
permit options to have accelerated or immediate vesting, and provide for
certain other rights, in the event of a "change in control" or "transfer of
control", as defined in the respective plans.


Item 12.    Certain Relationships and Related Transactions.

None.


Item 13.    Exhibits.

Exhibit Number          Description of Exhibit
-------------------------------------------------------

2.1  Corporate Reorganization Agreement between the Company and Julie Maranto,
     dated August 13, 2004 (included as Exhibit 2.1 to the Form 8-K filed
     August 19, 2004, and incorporated herein by reference).

3.1  Amended and Restated Certificate of Incorporation, dated August 11, 1995
     (included as Exhibit 3.(i) to the Form 10-SB12G filed January 24, 1997,
     and incorporated herein by reference).

3.2  Amended and Restated Bylaws, dated August 11, 1995 (included as Exhibit
     3.(ii) to the Form 10-SB12G filed January 24, 1997, and incorporated
     herein by reference).

3.3  Certificate of Amendment to the Certificate of Incorporation (included as
     Exhibit 3.3 to the Form 10-KSB filed September 14, 1998, and incorporated
     herein by reference).

<PAGE> 64


3.4  Certificate of Amendment to the Certificate of Incorporation (included as
     Exhibit 3.(i) to the Form 10-QSB filed May 5, 2003, and incorporated
     herein by reference).

4.1  Registration Rights Agreement between the Company and Benchmark
     Consulting Inc., dated May 30, 2003 (included as Exhibit 10.37 to the
     Form 10-QSB filed August 18, 2003, and incorporated herein by reference).

4.2  Warrant Agreement between the Company and Benchmark Consulting Inc.,
     dated May 30, 2003 (included as Exhibit 10.38 to the Form 10-QSB filed
     August 18, 2003, and incorporated herein by reference).

4.3  Registration Rights Agreement between the Company and Dutchess Private
     Equities Fund, II, L.P., dated June 23, 2004 (included as Exhibit 10.70
     to the Form 8-K filed June 29, 2004, and incorporated herein by
     reference).

4.4  Warrant Agreement between the Company and Rubenstein Investor Relations,
     Inc., dated September 16, 2004 (included as Exhibit 4.1 to the Form
     10-QSB filed November 22, 2004, and incorporated herein by reference).

4.5  Amended and Restated Certificate of Designation for Series B Convertible
     Preferred Stock, dated March 2, 2005 (included as Exhibit 4.1 to the Form
     8-K filed March 10, 2005, and incorporated herein by reference).

4.6  Certificate of Designation for Series C Convertible Preferred Stock,
     dated April 1, 2005 (included as Exhibit 4.1 to the Form 8-K filed April
     13, 2005, and incorporated herein by reference).

10.1 Consulting Agreement between the Company and Berkshire Capital
     Management Co., Inc., dated April 24, 2001 (included as Exhibit 10.11 to
     the Form 8-K filed November 6, 2002, and incorporated herein by
     reference).

10.2 Consulting and Finder's Fee Agreement between the Company and The Herman
     Group, L.P., dated May 29, 2001 (included as Exhibit 10.12 to the Form
     8-K filed November 6, 2002, and incorporated herein by reference).

10.3 Engagement Letter between the Company and Petty International
     Development Corp., dated April 5, 2001 (included as Exhibit 10.13 to the
     Form 8-K filed November 6, 2002, and incorporated herein by reference).

10.4 Consulting Agreement between the Company and Ron Sparkman, dated March 7,
     2001 (included as Exhibit 10.14 to the Form 8-K filed November 6, 2002,
     and incorporated herein by reference).


<PAGE> 65



10.5  Consulting Agreement between the Company and Rockne J. Horvath, dated
      March 6, 2002 (included as Exhibit 10.15 to the Form 8-K filed November
      6, 2002, and incorporated herein by reference).

10.6  Consulting Agreement between the Company and Stephen K. Carper, dated
      March 13, 2002 (included as Exhibit 10.16 to the Form 8-K filed November
      6, 2002, and incorporated herein by reference).

10.7  Consulting Agreement between the Company and Renee H. Ethridge, dated
      March 15, 2002 (included as Exhibit 10.17 to the Form 8-K filed November
      6, 2002, and incorporated herein by reference).

10.8  Consulting Agreement between the Company and Technical Objective, Inc.,
      dated March 18, 2002 (included as Exhibit 10.18 to the Form 8-K filed
      November 6, 2002, and incorporated herein by reference).

10.9  Debt Resolution Agreement between the Company and Gary F. Kimmons, dated
      March 20, 2002 (included as Exhibit 10.19 to the Form 8-K filed November
      6, 2002, and incorporated herein by reference).

10.10 Interim Compensation Agreement between the Company and Gary F. Kimmons,
      dated March 20, 2002 (included as Exhibit 10.20 to the Form 8-K filed
      November 6, 2002, and incorporated herein by reference).

10.11 Amended and Restated Consulting Agreement between the Company and Dick
      Meador, dated March 20, 2002 (included as Exhibit 10.21 to the Form 8-K
      filed November 6, 2002, and incorporated herein by reference).

10.12 Promissory Note between the Company and BDO Seidman LLP, dated June 2,
      2002 (included as Exhibit 10.22 to the Form 8-K filed November 6, 2002,
      and incorporated herein by reference).

10.13 Consulting Agreement between the Company and Alan S. Litvak, dated
      September 13, 2002 (included as Exhibit 10.23 to the Form 8-K filed
      November 6, 2002, and incorporated herein by reference).

10.14 Promissory Note from the Company to Gary Kimmons, dated September 26,
      2002 (included as Exhibit 10.24 to the Form 8-K filed November 6, 2002,
      and incorporated herein by reference).

10.15 Marketing Agreement between the Company and BTH2, dated June 1, 2002
      (included as Exhibit 10.25 to the Form 10-QSB filed May 5, 2003, and
      incorporated herein by reference).

10.16 Consulting Agreement between the Company and AfterPlay Entertainment
      Inc., dated November 12, 2002 (included as Exhibit 10.26 to the Form
      10-KSB filed May 5, 2003, and incorporated herein by reference).

10.17 Consulting Agreement between the Company and Suns Associates Group,
      dated November 13, 2002 (included as Exhibit 10.27 to the Form 10-KSB
      filed May 5, 2003, and incorporated herein by reference).


<PAGE> 66



10.18 Non-Employee Director Agreement between the Company and Dick Meador,
      dated March 31, 2003 (included as Exhibit 10.28 to the Form 10-KSB filed
      May 5, 2003, and incorporated herein by reference).

10.19 Employment Agreement between the Company and Gary F. Kimmons, dated
      February 1, 2003 (included as Exhibit 10.29 to the Form 10-KSB filed May
      5, 2003, and incorporated herein by reference).

10.20 2003 Stock Option Plan, dated February 1, 2003 (included as Exhibit 4.1
      to the Form S-8 filed May 12, 2003, and incorporated herein by
      reference).

10.21 Non-Employee Directors and Consultants Retainer Stock Plan for the Year
      2003, dated April 1, 2003 (included as Exhibit 4.2 to the Form S-8 filed
      May 12, 2003, and incorporated herein by reference).

10.22 Settlement Agreement between the Company and Brewer & Pritchard, P.C.,
      dated April 28, 2003 (included as Exhibit 4.3 to the Form S-8 filed May
      12, 2003, and incorporated herein by reference).

10.23 Financial Public Relations Agreement between the Company and Strategic
      Resources, dated April 24, 2003 (included as Exhibit 10.32 to the Form
      10-QSB filed August 18, 2003, and incorporated herein by reference).

10.24 Settlement Agreement between the Company and Brewer & Pritchard, P.C.,
      dated April 28, 2003 (included as Exhibit 10.33 to the Form 10-QSB filed
      August 18, 2003, and incorporated herein by reference).

10.25 Consulting Agreement between the Company and Sage Office Solutions,
      dated May 4, 2003 (included as Exhibit 10.34 to the Form 10-QSB filed
      August 18, 2003, and incorporated herein by reference).

10.26 Consulting Agreement between the Company and Donald Giebler, dated May
      14, 2003 (included as Exhibit 10.35 to the Form 10-QSB filed August 18,
      2003, and incorporated herein by reference).

10.27 Consulting Agreement between the Company and Benchmark Consulting Inc.,
      dated May 30, 2003 (included as Exhibit 10.36 to the Form 10-QSB filed
      August 18, 2003, and incorporated herein by reference).

10.28 Consulting Agreement between the Company and W. Andrew Stack, dated July
      22, 2003 (included as Exhibit 10.39 to the Form 10-QSB filed August 18,
      2003, and incorporated herein by reference).

10.29 Consulting Agreement between the Company and Gust C. Kepler, dated
      September 17, 2003 (included as Exhibit 4.1 to the Form S-8 filed
      September 19, 2003, and incorporated herein by reference).

10.30 Compensation Agreement between the Company and Wenthur & Chachas, LLP,
      dated September 17, 2003 (included as Exhibit 4.2 to the Form S-8 filed
      September 19, 2003, and incorporated herein by reference).


<PAGE> 67



10.31 BMA Ventures, Inc. Agreement between the Company and BMA Ventures, Inc.,
      dated November 11, 2003 (included as Exhibit 10.42 to the Form 10-QSB
      filed November 17, 2003, and incorporated herein by reference).

10.32 Distribution Agreement between the Company and NPI Management Group,
      Inc., dated October 10, 2003 (included as Exhibit 99.1 to the Form
      10-QSB filed November 17, 2003, and incorporated herein by reference).

10.33 Consulting Services Agreement between the Company and Stanton, Walker &
      Company, dated November 5, 2003 (included as Exhibit 4.1 to the Form S-8
      filed November 10, 2003, and incorporated herein by reference).

10.34 Consulting Services Agreement between the Company and Wenthur & Chachas,
      LLP, dated November 5, 2003 (included as Exhibit 4.2 to the Form S-8
      filed November 10, 2003, and incorporated herein by reference).

10.35 2004 Stock Option Plan (included as Exhibit 4.1 to the Form S-8 filed
      April 5, 2004, and incorporated herein by reference).

10.36 Non-Employee Director Agreement between the Company and Dick Meador,
      dated December 24, 2003 (included as Exhibit 10.47 to the Form 10-KSB
      filed April 23, 2004, and incorporated herein by reference).

10.37 Promissory Note from the Company to Deanna Slater, dated December 31,
      2003 (included as Exhibit 10.48 to the Form 10-KSB filed April 23, 2004,
      and incorporated herein by reference).

10.38 Promissory Note from the Company to Joel Pickell, dated December 31,
      2003 (included as Exhibit 10.49 to the Form 10-KSB filed April 23, 2004,
      and incorporated herein by reference).

10.39 Referral Fee Agreement between the Company and Michael Aczon, dated
      January 19, 2004 (included as Exhibit 10.50 to the Form 10-KSB filed
      April 23, 2004, and incorporated herein by reference).

10.40 Notice of Default and Termination Letter from the Company to NPI
      Management Group, Inc., dated February 5, 2004 (included as Exhibit
      10.51 to the Form 10-KSB filed April 23, 2004, and incorporated herein
      by reference).

10.41 Consulting Agreement between the Company and Z.A. Consulting, LLC, dated
      February 27, 2004 (included as Exhibit 10.52 to the Form 10-KSB filed
      April 23, 2004, and incorporated herein by reference).

10.42 Investor Relations Agreement between the Company and FOCUS Partners LLC,
      March 12, 2004 (included as Exhibit 10.53 to the Form 10-KSB filed April
      23, 2004, and incorporated herein by reference).


<PAGE> 68


10.43 First Amendment to Consulting Services Agreement between the Company and
      Stanton, Walker & Company, dated March 29, 2004 (included as Exhibit
      10.54 to the Form 10-KSB filed April 23, 2004, and incorporated herein
      by reference).

10.44 Consulting Agreement between the Company and Isabella Elliott, dated
      March 26, 2004 (included as Exhibit 10.56 to the Form 10-KSB filed April
      23, 2004, and incorporated herein by reference).

10.45 Second Amended and Restated Consulting Agreement between the Company and
      Harvey Levin, dated October 11, 2004 (included as Exhibit 99.6 to the
      Form S-8 filed October 19, 2004, and incorporated herein by reference).

10.46 Second Amended and Restated Consulting Agreement between the Company and
      Jon Pearman, dated October 11, 2004 (included as Exhibit 99.5 to the
      Form S-8 filed October 19, 2004, and incorporated herein by reference).

10.47 Third Amended and Restated Consulting Agreement between the Company and
      Lisa L. Fincher, dated October 11, 2004 (included as Exhibit 99.4 to the
      Form S-8 filed October 19, 2004, and incorporated herein by reference).

10.48 Third Amended and Restated Consulting Agreement between the Company and
      Ted Davis, dated October 11, 2004 (included as Exhibit 99.1 to the Form
      S-8 filed October 19, 2004, and incorporated herein by reference).

10.49 Third Amended and Restated Consulting Agreement between the Company and
      D. Scott Elliott, dated October 11, 2004 (included as Exhibit 99.2 to
      the Form S-8 filed October 19, 2004, and incorporated herein by
      reference).

10.50 Stock and Warrant Purchase Agreement between the Company and D. Scott
      Elliot, dated April 5, 2004 (included as Exhibit 10.30 to the Form
      10-QSB filed August 18, 2004, and incorporated herein by reference).

10.51 Amended and Restated Consulting Agreement between the Company and Linda
      Davis, dated June 3, 2004 (included as Exhibit 10.16 to the Form 10-QSB
      filed August 18, 2004, and incorporated herein by reference).

10.52 Consulting Agreement between the Company and Deanna Slater, dated May
      14, 2004 (included as Exhibit 10.68 to the Form 10-QSB filed May 19,
      2004, and incorporated herein by reference).

10.53 Promissory Note between the Company and Elaine Leonard, dated February
      28, 2004 (included as Exhibit 10.62 to the Form 10-QSB filed May 19,
      2004, and incorporated herein by reference).


<PAGE> 69


10.54 Promissory Note between the Company and Joel Pickell, dated March 31,
      2004 (included as Exhibit 10.63 to the Form 10-QSB filed May 19, 2004,
      and incorporated herein by reference).

10.55 Promissory Note between the Company and Deanna Slater, dated March 31,
      2004 (included as Exhibit 10.64 to the Form 10-QSB filed May 19, 2004,
      and incorporated herein by reference).

10.56 Promissory Note between the Company and Harvey Levin, dated April 2,
      2004 (included as Exhibit 10.65 to the Form 10-QSB filed May 19, 2004,
      and incorporated herein by reference).

10.57 Promissory Note between the Company and Jon Pearman, dated April 2, 2004
      (included as Exhibit 10.66 to the Form 10-QSB filed May 19, 2004, and
      incorporated herein by reference).

10.58 Promissory Note between the Company and Ted Davis, dated April 2, 2004
      (included as Exhibit 10.67 to the Form 10-QSB filed May 19, 2004, and
      incorporated herein by reference).

10.59 Investment Agreement between the Company and Dutchess Private Equities
      Fund, II, L.P., dated June 23, 2004 (included as Exhibit 10.69 to the
      Form 8-K filed June 29, 2004, and incorporated herein by reference).

10.60 Purchase Agreement between the Company and Sunil Nariani, dated June 16,
      2004 (included as Exhibit 2.1 to the Form 8-K filed June 23, 2004, and
      incorporated herein by reference).

10.61 Amended Purchase Agreement between the Company and Sunil Nariani, dated
      June 18, 2004 (included as Exhibit 2.2 to the Form 8-K filed June 23,
      2004, and incorporated herein by reference).

10.62 Consulting Agreement between the Company and Sunil Nariani, dated July
      15, 2004 (included as Exhibit 10.72 to the Form 8-K filed July 28, 2004,
      and incorporated herein by reference).

10.63 Employment Agreement between Stellar Software Network, Inc. and Sunil
      Nariani, dated July 15, 2004 (included as Exhibit 10.71 to the Form 8-K
      filed July 28, 2004, and incorporated herein by reference).

10.64 Employment Agreement between the Company and Julie Maranto, dated August
      19, 2004 (included as Exhibit 10.22 to the Form 10-QSB filed November
      22, 2004, and incorporated herein by reference).

10.65 Referral Fee Agreement between the Company and Shay Kronfeld, dated July
      23, 2004 (included as Exhibit 10.23 to the Form 10-QSB filed November
      22, 2004, and incorporated herein by reference).

10.66 Consulting Agreement between the Company and Richard Russotto, dated
      September 13, 2004 (included as Exhibit 99.3 to the Form S-8 filed
      October 19, 2004, and incorporated herein by reference).


<PAGE> 70


10.67 Sublease Agreement between the Company and 432 Group, LLC, dated October
      1, 2004 (included as Exhibit 10.25 to the Form 10-QSB filed November 22,
      2004, and incorporated herein by reference).

10.68 Letter re: Agreement to retain Rubenstein Investor Relations, Inc.,
      dated September 15, 2004 (included as Exhibit 99.2 to the Form 8-K filed
      September 27, 2004, and incorporated herein by reference).

10.69 Referral Fee Agreement between the Company and Wade Brooks, dated August
      30, 2004 (included as Exhibit 10.27 to the Form 10-QSB filed November
      22, 2004, and incorporated herein by reference).

10.70 Referral Fee Agreement between the Company and Barry Bergman, dated
      September 9, 2004 (included as Exhibit 10.28 to the Form 10-QSB filed
      November 22, 2004, and incorporated herein by reference).

10.71 Referral Fee Agreement between the Company and Hantman & Associates
      and/or Robert Hantman, dated August 27, 2004 (included as Exhibit 10.29
      to the Form 10-QSB filed November 22, 2004, and incorporated herein by
      reference).

10.72 Amended Consulting Services Agreement between the Company and Diya
      Systems, Inc., dated November 19, 2004 (included as Exhibit 10.1 to the
      Form 8-K filed November 23, 2004, and incorporated herein by reference).

10.73 Amended 2004 Stock Option Plan (included as Exhibit 4.1 to the Form S-8
      filed December 28, 2004, and incorporated herein by reference).

10.74 Purchase Agreement between the Company and Evert Wilbrink and Bert De
      Ruiter, dated January 17, 2005 (included as Exhibit 10.1 to the Form 8-K
      filed February 16, 2005, and incorporated herein by reference).

10.75 Purchase Agreement between the Company and Ronald C. Rodgers and W. R.
      Slaughter, dated March 2, 2005 (included as Exhibit 10.1 to the Form 8-K
      filed March 10, 2005, and incorporated herein by reference).

10.76 Employment Agreement between the Company and RS Entertainment, Inc. and
      William R. Slaughter, dated February 28, 2005 (included as Exhibit 10.1
      to the Form S-8 filed March 30, 2005, and incorporated herein by
      reference).

10.77 Consulting Agreement between the Company and Randall Hicks, dated March
      21, 2005 (included as Exhibit 10.2 to the Form S-8 filed March 30, 2005,
      and incorporated herein by reference).

10.78 Employment Agreement between the Company and RS Entertainment, Inc. and
      Ronald C. Rodgers, dated February 28, 2005 (included as Exhibit 10.3 to
      the Form S-8 filed March 30, 2005, and incorporated herein by
      reference).

<PAGE> 71


10.79 Purchase Agreement between the Company and Royce D. Bybee and Stephen
      Elderkin, dated April 7, 2005 (included as Exhibit 10.1 to the Form 8-K
      filed April 14, 2005, and incorporated herein by reference).

21.1  List of Subsidiaries (included as Exhibit 21.1 to Form 10-KSB filed
      on May 9, 2005, and incorporated herein by reference).

31.1  Certification of the Chief Executive Officer/Chief Financial Officer
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1  Certification of Officers pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



Item 14.     Principal Accountant Fees and Services.

Independent Public Accountants
------------------------------

     The Company's independent accountants for the fiscal years ended December
31, 2004 and 2003 was HJ & Associates, LLC of Salt Lake City, Utah.

     (a)   Audit Fees.  During the fiscal years ended December 31, 2004 and
2003, the aggregate fees billed by HJ & Associates LLC, for services rendered
for the audit of our annual financial statements and the review of the
financial statements included in our quarterly reports on Form 10-QSB or
services provided in connection with the statutory and regulatory filings or
engagements for those fiscal years, was $67,100 and $26,650, respectively.

     (b)   Audit-Related Fees.  During the fiscal years ended December 31,
2004 and 2003 our auditors, HJ & Associates LLC, did not receive any fees for
any audit-related services other than as set forth in paragraph (a) above.

     (c)   Tax Fees.  Our auditors did not provide tax compliance or tax
planning advice during the fiscal years ended December 31, 2004 and 2003.

     (d)   Other Fees.  During the fiscal years ended December 31, 2004 and
2003, our auditors, HJ & Associates, LLC did not receive any fees for services
rendered,other than those described above.


<PAGE> 72


                            SIGNATURE

     In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the
undersigned, there unto duly authorized.

                                        GK Intelligent Systems, Inc.



Dated: November 16, 2005                /s/ Gary F. Kimmons
                                        ____________________________________
                                        By: Gary F. Kimmons
                                        Its: Chief Executive Officer and
                                        Chief Financial Officer


     In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.


                                         /s/ Gary F. Kimmons
Date: November 16, 2005                  _________________________________
                                         Gary F. Kimmons, Director



                                         /s/ Dick Meador
Date: November 16, 2005                  _________________________________
                                         Dick Meador, Director



                                         /s/ Kathryn Kimmons
Date: November 16, 2005                  _________________________________
                                         Kathryn Kimmons, Director





<PAGE> 73